Solar Companies Slip as Tax Plan Creates Dark Cloud for Industry

(Bloomberg) -- First Solar Inc. and SunPower Corp., the biggest U.S. solar manufacturers, slumped after the U.S. Senate passed a tax proposal over the weekend that would make it harder to finance renewable-energy projects.

First Solar sank as much as 6.9 percent, the biggest intraday decline in more than a month. SunPower declined as much as 7.6 percent and the Bloomberg Global Large Solar Index of 16 companies slipped as much as 3.2 percent.

The Senate’s plan threatens to stifle the tax-equity market, a key source of financing for renewable energy. It includes a provision that imposes a minimum tax on multinational companies’ foreign transactions. In tax-equity deals, renewable-energy developers sell portions of their projects’ tax credits to corporations -- often big banks and some insurance companies -- that can apply the credits to their own tax bills.

This provision would “effectively impact tax renewable credits by as much as 100 percent in certain instances, thus rendering them of little value,” Brian Lee, an analyst at Goldman Sachs Group Inc., said in a research note. It has “the potential to negatively impact a key source of funding for new wind/solar projects in the U.S.”

Other solar companies slid Monday, led by Canadian Solar Inc.’s 9.9 percent decline. JinkoSolar Holding Co., the world’s biggest publicly traded panel maker, slumped as much as 7.6 percent.

A major part of the Republican reform drive is lowering corporate rates, a move that may further drive down interest from large multinational companies in investing in tax credits that wind and solar developers sell.

“The amount of of tax equity financing available may decline given then the lower tax rate, which could potentially be negative for First Solar and SunPower,” Ben Kallo, an analyst at Robert W. Baird & Co., said in a research note.

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