First Solar Signs Agreements for Sale of up to $700 Million in 2023 IRA Advanced Manufacturing Production Tax Credits

Rhea-AI Summary

First Solar, Inc. (Nasdaq: FSLR) announced two Tax Credit Transfer Agreements (TCTAs) with Fiserv, Inc. for the sale of $500 million and up to $200 million of 2023 Inflation Reduction Act (IRA) Advanced Manufacturing Production tax credits at a price of $0.96 per $1 of tax credits. The agreements are believed to be the first significant Section 45X credit transfer in the solar industry, and were signed 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 liquidity generated from the transaction is expected to accelerate the enhancement of First Solar's cash position in the US, further strengthening its balance sheet and allowing continued investment in growth, such as research and development. The company expects a pre- and post-tax impact of up to $28 million for the 2023 financial year, resulting in a reduction of 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, and the 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.

Insights

Financial Analyst

The strategic sale of $700 million in tax credits by First Solar to Fiserv represents a sophisticated financial maneuver that highlights the growing intersection between renewable energy incentives and corporate finance. The transaction's pricing at $0.96 per $1 of tax credits indicates strong demand and perceived value of these credits, which can be attributed to the broader market's confidence in the renewable energy sector and the expected profitability of solar manufacturing under the Inflation Reduction Act's favorable policies.

For investors, the immediate consideration is the impact on First Solar's liquidity and balance sheet. The infusion of cash will likely bolster the company's ability to invest in expansion and R&D, which is crucial for maintaining competitive advantage. However, there's a trade-off reflected in the expected earnings dilution of up to $0.26 per share. This may cause short-term volatility in First Solar's stock price as markets digest the implications of the reduced earnings against the potential for long-term growth.

In the broader context, this deal could set a precedent for similar transactions within the industry, potentially creating a new market for tax credit trading. This could provide a new avenue for renewable energy companies to secure funding and for investors to gain exposure to the sector's growth.

Energy Policy Analyst

The implementation of Section 45X credits under the Inflation Reduction Act is a pivotal moment for the renewable energy industry, specifically solar manufacturing. These credits aim to stimulate domestic production and reduce dependency on foreign supply chains. The swift action by First Solar to monetize these credits underscores the industry's responsiveness to policy incentives and its readiness to capitalize on government support.

From a policy perspective, the transaction validates the IRA's intent to incentivize high-value domestic manufacturing. It also demonstrates the potential effectiveness of tax credits as a tool for accelerating investment in renewable energy infrastructure. The expected investments by First Solar in new manufacturing facilities and an R&D innovation center align with the policy's objectives to spur innovation and job creation within the United States.

For stakeholders, including policymakers and industry participants, the success of this transaction could influence future legislation and the design of financial incentives for renewable energy. It may encourage further investment in the sector and contribute to the United States' broader energy independence and sustainability goals.

Market Research Analyst

First Solar's transaction with Fiserv is indicative of a maturing solar industry where financial instruments such as Tax Credit Transfer Agreements (TCTAs) are leveraged to optimize capital structure and fuel growth. The marketability and value of the Advanced Manufacturing Production tax credits have been confirmed through this deal, suggesting that the market has a favorable view of the long-term viability of domestic solar manufacturing.

Analyzing the industry's landscape, First Solar's aggressive expansion plans to achieve 14 gigawatts of manufacturing capacity by 2026 reflect an anticipation of increasing demand for solar modules. The investment in a dedicated R&D center further signifies a commitment to innovation, which is essential for maintaining technological leadership.

Given the company's vertical integration, which allows for control over the entire manufacturing process, First Solar is well-positioned to benefit from economies of scale and potentially lower production costs. This operational efficiency, coupled with the expected increase in capacity, could lead to a stronger market position and increased market share, shaping the competitive dynamics in the solar industry.

• 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

TEMPE, Ariz.--(BUSINESS WIRE)-- First Solar, Inc. (Nasdaq: FSLR) today 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.

For more information on this transaction please visit www.firstsolar.com/2023TCTA.

About First Solar, Inc.

First Solar is a leading American solar technology company and global provider of responsibly produced eco-efficient solar modules advancing the fight against climate change. Developed at R&D labs in California and Ohio, the company’s advanced thin film PV modules represent the next generation of solar technologies, providing a competitive, high-performance, lower-carbon alternative to conventional crystalline silicon PV modules. From raw material sourcing and manufacturing through end-of-life module recycling, First Solar’s approach to technology embodies sustainability and a responsibility towards people and the planet. For more information, please visit www.firstsolar.com.

For First Solar Investors

This press release contains various “forward-looking statements” which are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements concerning: (i) the sale of up to $700 million of 2023 Inflation Reduction Act (IRA) Advanced Manufacturing Production tax credits at a price of $0.96 per $1 of tax credits; (ii) our expectation that the two transactions for $500 million and up to $200 million will reduce our full-year 2023 pre- and post-tax earnings by up to $28 million, resulting in a reduction of 2023 diluted earnings by up to $0.26 per share; (iii) our expectation of having 14 gigawatts of fully vertically integrated US solar manufacturing capacity by 2026; (iv) our expected investment of over $2 billion in new manufacturing facilities in Alabama and Louisiana; and (v) our investment of up to $370 million in a dedicated R&D innovation center in Perrysburg, Ohio and the expectation that it will be completed in 2024. These forward-looking statements are often characterized by the use of words such as “estimate,” “expect,” “anticipate,” “project,” “plan,” “intend,” “seek,” “believe,” “forecast,” “foresee,” “likely,” “may,” “should,” “goal,” “target,” “might,” “will,” “could,” “predict,” “continue” and the negative or plural of these words and other comparable terminology. Forward-looking statements are only predictions based on First Solar’s current expectations and First Solar’s projections about future events and therefore speak only as of the date of this release. You should not place undue reliance on these forward-looking statements. First Solar undertakes no obligation to update any of these forward-looking statements for any reason, whether as a result of new information, future developments or otherwise. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause First Solar’s actual results, levels of activity, performance, or achievements to differ materially from those expressed or implied by these statements. These factors include, but are not limited to, the expected timing and likelihood of completion of the transaction; the risk that the parties may not be able to satisfy the conditions to the transaction in a timely manner or at all; and the matters discussed under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our most recent Annual Report on Form 10-K and our subsequently filed Quarterly Reports on Form 10-Q, as supplemented by our other filings with the Securities and Exchange Commission.

View source version on businesswire.com: https://www.businesswire.com/news/home/20231227345812/en/

Media

Reuven Proença

First Solar Media

media@firstsolar.com

Investors

Richard Romero

First Solar Investor Relations

investor@firstsolar.com

Source: First Solar, Inc.

FAQ

What are the details of the Tax Credit Transfer Agreements (TCTAs) between First Solar, Inc. and Fiserv, Inc.?

First Solar, Inc. (Nasdaq: FSLR) entered into two TCTAs with Fiserv, Inc. for the sale of $500 million and up to $200 million of 2023 Inflation Reduction Act (IRA) Advanced Manufacturing Production tax credits at a price of $0.96 per $1 of tax credits.

What is the significance of the TCTAs in the solar industry?

The agreements are believed to be the first significant Section 45X credit transfer in the solar industry and were signed 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.

How will the liquidity generated from the transaction impact First Solar, Inc.?

The liquidity generated is expected to accelerate the enhancement of First Solar's cash position in the US, further strengthening its balance sheet and allowing continued investment in growth, such as research and development.

What is the expected financial impact of the transaction on First Solar, Inc. for the 2023 financial year?

The company expects a pre- and post-tax impact of up to $28 million for the 2023 financial year, resulting in a reduction of diluted earnings of up to $0.26 per share for the year.

What is the source of the tax credits sold in the TCTAs?

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.

What are the future investment plans of First Solar, Inc. in terms of manufacturing facilities and research and development?

The 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.