First Solar Plans to Offload IRA Tax Credits Worth $700 Million

Fiserv will pay a price of $0.96 per $1 of tax credits to First Solar during the first half of 2024


U.S.-based solar technology company First Solar has entered into two separate tax credit transfer agreements to sell $500 million and up to $200 million of Inflation Reduction Act (IRA) advanced manufacturing production tax credits to Fiserv, a financial technology services provider.

According to the terms of these agreements, Fiserv will acquire the tax credits at a rate of $0.96 per $1 during the first half of 2024. This price includes fees and commissions paid by First Solar to the placement agent.

The tax credits are the outcome of the sale of solar modules produced in 2023 by First Solar’s operational manufacturing facilities in the U.S., including its recently commissioned third Ohio factory.

First Solar operates fully integrated solar manufacturing facilities where thin film wafers, cells, and modules are produced through an integrated process. In this process, a sheet of glass undergoes transformation into a fully functional solar panel in approximately four hours.

Due to its vertical integration, First Solar qualifies for advanced manufacturing production tax credits, which are permissible for the production of solar wafers, cells, and modules under Section 45X of the IRA.

The production tax credit is a per-kilowatt-hour tax credit applicable to electricity generated by solar and qualifying technologies during the first decade of a system’s operation. It serves to reduce federal income tax liability and is subject to annual inflation adjustments.

Solar systems placed in service in 2022 or later, commencing construction before 2033, are eligible for a 2.75 ¢/kWh production tax credit if they meet labor requirements outlined by the Treasury Department or are under 1 MW in size.

According to the Internal Revenue Service and the Treasury Department guidelines, “Manufacturers may also elect to transfer all, or a portion, of the tax credits for a given year to an unrelated eligible taxpayer. Credits from a single property can be sold to multiple buyers in the same tax year.”

First Solar anticipates that the liquidity generated from this transaction will expedite the enhancement of its cash position in the U.S. through the monetization of Section 45X credits. This move is expected to fortify the company’s balance sheet and support continued investments in crucial growth areas, such as research and development.

Citigroup Global Markets is the placement agent for First Solar on the transaction. The agreements follow the proposed rulemaking by the U.S. Department of Treasury and Internal Revenue Service to implement the Section 45X credits.

In August last year, President Joe Biden signed the Inflation Reduction Act, which proposes $369.75 billion in energy security and climate change programs over ten years.