Dive Brief:
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First Solar has agreed to sell up to $700 million in 2023 advanced manufacturing production tax credits to fintech firm Fiserv, according to a Dec. 27 announcement.
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Under the terms of the deal, Fiserv will pay $.96 per $1 of tax credits transferred from First Solar.
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First Solar said the deal is “believed to be the first significant Section 45X credit transfer in the solar industry.” More such deals can be expected in the months to come, according to Peter Henderson, a CPA and partner who specializes in tax credit incentives at Moss Adams.
Dive Insight:
Based on current economic and corporate financial conditions, 2024 could be a big year for the sale of renewable energy tax credits — particularly of 45X advanced manufacturing tax credits, Henderson said.
High interest rates mean many companies will look for deals that allow them to maximize their current bank balances and avoid debt, Henderson said. And while the IRA created provisions for both direct pay, and the transfer of tax credits to third parties, there remains a lot of uncertainty around how long it will take the IRS to process and make payments on applications for direct payments of renewable energy tax incentives.
On top of this, the 45X tax credit is subject to a specific provision that requires manufacturers who elect to take direct payments to limit that election to five consecutive years. If you take all those factors into account, Henderson said it could be financially advantageous for manufacturers who plan to grow to sell their 2023 tax credits, invest the money in their expansion plans and save the direct pay option for later when their manufacturing capacity is even greater — even if, Henderson said, that means selling tax credits for $.96 on the dollar.
“Electing direct pay may or may not be the best option for the current year,” Henderson said. “There are advantages to transferability.”
In the company's Dec. 27 announcement, First Solar leaders indicated they planned to use earnings from the tax credit sale to fund future growth.
“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,” Alex Bradley, chief financial officer for First Solar, said in a statement.
First Solar expects to invest more than $2 billion in new and expanded manufacturing facilities in Alabama, Louisiana and Ohio by 2026, according to the company announcement.
Correction: We've updated the subhead of this story to correct the name of the company where Peter Henderson works.
