First Solar has agreed to sell up to $700 million of tax credits to Fiserv. The credits were earned by making solar modules in the US during 2023. First Solar signed eight days after the US Treasury published the draft rules that make the sale possible. The question is what turning those credits into cash so quickly cost it.
Key takeaways
- First Solar signed agreements on 22 December 2023, announced on 27 December 2023, to sell up to $700 million of 2023 Section 45X Advanced Manufacturing Production tax credits to Fiserv.
- Fiserv pays $0.96 for each $1 of First Solar's tax credits: $480 million for $500 million of credits and $192 million for a further $200 million, with payment during the first half of 2024.
- The 45X credits come from photovoltaic modules First Solar produced in 2023 at its US manufacturing footprint, including its third Ohio factory, commissioned in 2023.
- First Solar expects the sale to have a pre-tax and post-tax impact of up to $28 million, reducing its 2023 diluted earnings by up to $0.26 per share.
- Among US tax credit transfer deals Enerdatics records from January 2023 to June 2024, First Solar's $700 million is the largest disclosed sale.
What is a 45X tax credit, and why can First Solar sell it?
A 45X credit is a US federal tax credit paid for each eligible clean energy component manufactured domestically and sold. It was created by the Inflation Reduction Act to reward US production and reduce reliance on Chinese-made components. First Solar qualifies because its US plants are fully vertically integrated, turning glass into finished thin film modules on site, so it earns credits at more than one stage of production.
A credit is only valuable to a company with enough tax to offset. The Inflation Reduction Act also allows many credits to be transferred: sold for cash to an unrelated buyer, which then uses them against its own tax bill. That is what makes Fiserv the counterparty. It needs no connection to solar. It needs a large US tax liability and an appetite for buying it down at a discount.
The timing followed the rules. The Treasury and the Internal Revenue Service issued a notice of proposed rulemaking to implement 45X in mid-December 2023. First Solar signed eight days later, in time to sell credits earned on 2023 production.
How much does the 96 cent price cost First Solar?
Four cents on every dollar of credit, or up to $28 million on the full $700 million. Fiserv pays $672 million for $700 million of credits if both tranches complete. The $28 million gap is the price of turning a credit First Solar could otherwise only use against its own tax bill into cash within months.
First Solar has said the cost will reduce its 2023 diluted earnings by up to $0.26 per share. That is a visible charge, which shows the company valued the cash above the accounting cost. Its stated uses for the proceeds are strengthening its balance sheet and continuing to invest in research and development.
The investment plan explains the preference for cash now. First Solar expects to invest more than $2 billion in new manufacturing facilities in Alabama and Louisiana, plans to expand its Ohio footprint to reach 14 GW of fully vertically integrated US capacity by 2026, and is investing up to $370 million in an R&D innovation center in Perrysburg, Ohio. Its $1 billion revolving credit and guarantee facility, set up earlier in 2023 and covered in Enerdatics' analysis of First Solar's credit facility, sits alongside the credit sale as a second source of liquidity.
Who arranged the sale?
Citigroup Global Markets acted as placement agent for First Solar. Hunton Andrews Kurth was legal counsel to First Solar and DLA Piper was counsel to Fiserv. A placement agent on a tax credit sale plays a role similar to an arranger on a loan, matching a seller of credits with a buyer that has the tax capacity to absorb them.
Enerdatics records 19 US tax credit financings announced from January 2023 to June 2024. Three of them are Department of Energy awards of 48C manufacturing credits rather than sales, leaving 16 transfers. Eleven of the 16 disclose an amount, with a median of $103 million. First Solar's $700 million is the largest, ahead of the $580 million IRGAH sold to Bank of America Securities in August 2023 and the roughly $300 million Ashtrom Renewable Energy secured for the Tierra Bonita solar project in October 2023. Most of the remainder are project-level sales, such as ENGIE's $80 million to Schneider Electric and Recurrent Energy's $103 million to Bank of America.
What does the deal signal for US solar manufacturing?
It signals that manufacturing credits can be monetised at a scale and speed that rivals project credits. Most transfers in the Enerdatics set come from generating assets, where credits attach to a single project. First Solar's credits attach to a factory's annual output, which makes the volume larger and repeatable year after year while production continues.
It also sets a public reference price. Ninety-six cents is a figure other manufacturers can point to when they sell their own 45X credits. Silfab Solar secured funds through a sale of 45X credits to Schneider Electric in May 2024, though the amount was not disclosed. Broadwind raised $16 million through a sale of IRA tax credits to MarketAxess on 21 December 2023, six days before First Solar's announcement, which shows how quickly buyers and sellers moved once the draft rules were out. First Solar's sale was more than 40 times larger.
Finally, it changes how US solar manufacturers fund themselves. When credits on existing output can be sold for cash, capital raised for new factories becomes a separate question, a contrast explored in Enerdatics' analysis of Suniva's construction financing.
Frequently asked questions
How much did Fiserv pay First Solar for the tax credits?Fiserv agreed to pay $0.96 per $1 of credit: $480 million for $500 million of credits and $192 million for $200 million, $672 million in total if the full $700 million is sold.
Which tax credits did First Solar sell?Section 45X Advanced Manufacturing Production tax credits earned on photovoltaic modules First Solar produced in the US in 2023, including at its third Ohio factory.
When will First Solar receive the money?Fiserv pays during the first half of 2024. The agreements were signed on 22 December 2023.
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