Welcome to the $400 billion green subsidy gravy train.
The nation’s biggest solar-panel maker, First Solar, sells $3.5 billion a year of its “thin-film” solar panels made with exotic “cadmium telluride” semiconductors that work well in hot and humid regions and in low light.
Farhad “Fred” Ebrahimi, 84, is not an executive at the company. Instead, the Denver-based software entrepreneur made his initial fortune in the 1990s with publishing software QuarkXpress.
But he has for years been First Solar’s largest individual shareholder, with a stake of 5% worth nearly $1 billion. Shares shot up 20% last week, after trembling in value in just six months. Including Ebrahimi’s other assets, Forbes now estimates his net worth to be at least $1.1 billion. (Ebrahimi did not return multiple calls to comment on this story.)
Ebrahimi can thank West Virginia Sen. Joe Manchin for his recent good fortune. Manchin’s Inflation Reduction Act, signed into law last August, seems destined to both create a bunch of new green billionaires—and further enrich existing ones. Between now and 2031, the bill calls for spending an additional $100 billion on healthcare, plus nearly $400 billion in grants, loans and tax breaks to underwrite the green energy revolution.
To understand the enormity of the IRA’s impact, consider First Solar’s updated 2023 guidance. The company will sell enough solar panels to generate 12 gigawatts of electricity on a sunny day—sufficient to power some 2.4 million homes. Revenues, given a sales price of just under 30 cents per watt, will come in around $3.5 billion. Before the IRA, gross profit on those sales would have been on the order of $600 million. But thanks to the IRA’s generous 17-cents-per-watt manufacturing tax credit, First Solar’s margin will be double that. TD Cowen analyst Jeffrey Osborne figures this will goose First Solar’s 2023 earnings per share from $1.20 pre-IRA to about $7.50.
Even before the bill, First Solar had an order backlog, which has now ballooned to more than 16 gigawatts. That means billions in tax credits for First Solar and ample incentive to build more factories in Ohio, Indiana and India. Osborne thinks if the company can deliver on these expansions, earnings could grow to $24 a share by 2026. (Investor Ebrahimi has 5 million First Solar shares.)
Last week First Solar announced that it had received a big order for 4 gigawatts of solar panels from Lightsource BP, a solar power developer 50% owned by oil giant BP. It was Lightsource’s second order of that size in three years, spurred by the IRA. “Passage of the IRA is a watershed moment, an immediate success,” says Kevin Smith, CEO of the Americas for Lightsource. “Solar was already the biggest growing sector, and the IRA takes it to the next level, especially in terms of bringing back some of the manufacturing capacity that had escaped overseas.”
Lightsource has operations in 18 countries, but right now is focused on the U.S., where naturally it gets its own bite at the green subsidy apple. According to industry data from the National Renewable Energy Lab, the all-in costs for Lightsource to build out those 4 gigawatts of First Solar panels will be on the order of 70 cents per watt, roughly $2.8 billion. But the IRA will defray at least 30% of that, more than $800 million.
According to analysis by law firm McGuireWoods, the IRA enshrines solar investment tax credits of 30% of a project’s cost. Developers can unlock an additional 10% credit if they use only gear made in the U.S., and a further 10% credit if they build in a low-income community or on Native American land.
Lightsource BP (estimated 2022 revenues of $200 million) has a lot of “tax equity” partners in its U.S. projects, who put up cash in order to get a share of the tax benefits. Its founder and chairman, Nick Boyle, a Brit, owns about 40% of the company after selling half to BP in two tranches starting in 2017 for $200 million. It’s worth considerably more now, and Boyle could soon break into the billionaire ranks.
Other tycoons set to benefit from America’s big green subsidy boom include Michael Polsky, 74, whose Chicago-based Invenergy is a leading wind and solar developer. Last year Polsky (net worth $1.5 billion) sold a chunk of his company to Blackstone for $3 billion. In recent months they spent $800 million of that cash on winning bids to lease federal waters off California and the eastern seaboard where they intend to build hundreds of 500-foot-tall wind turbines. They’ll get back that ante; as with solar, the IRA grants a 30% investment tax credit for offshore wind, plus a 10% kicker for using wind turbines made in America.
Denver’s Phil Anschutz (83, net worth $10.9 billion) has spent more than a decade lining up all the permits what will be the nation’s biggest wind farm, in Wyoming, plus 700 miles of transmission lines to carry the juice to California. The IRA investment tax credits will save Anschutz billions on the $8 billion-plus project (ironic for a guy who fought the IRS for years over a disputed $140 million tax bill).
Houston’s John Arnold is another one to watch. Best known for his start as Enron’s natural gas-trading wunderkind, the 49-year-old Arnold (net worth: $3.3 billion) made his second and third fortunes with drilling offshore oil and backing at least ten solar projects. His Centaurus Renewable Energy since 2018 has grossed more than $800 million selling completed solar farms. Arnold is now backing startup Grid United, which aims to build hundreds of miles of high-voltage transmission lines to move zero-carbon electricity from solar and wind farms in the Midwest to coastal population centers. The IRA earmarks $760 million in grants for power line developers.
Arnold’s next bet: lithium. He owns a 10% stake in publicly traded Ioneer, which seeks to develop the Rhyolite Ridge open pit lithium mine in Nevada. In January, the project received “conditional commitment” from the Department of Energy for a $700 million loan at a sweetheart rate (usually no more than 200 basis points above Treasury bonds). Thanks in part to the IRA, DOE has funding to issue $350 billion in such loans.
As for Farhad “Fred” Ebrahimi, his First Solar stake is the only sizable public company investment that shows up in SEC filings. He has sold nearly 2 million shares in the past year for more than $100 million, perhaps to trim his holdings to just under the 5% reporting threshold.
Ebrahimi has been rich for a long time. Twenty-four years ago, we profiled him as the cantankerous founder of QuarkXpress and assigned him a net worth of $675 million ($1.2 billion in current dollars). Ebrahimi sold Quark to to Platinum Equity in 2011.
His interests—and assets—are wildly eclectic. In the Indian state of Punjab, where many of Quark’s programmers were based, he built and appears to still own real estate development QuarkCity, with office, industrial and residential buildings.
In 2018 he bought a controlling stake in Royal Hawaiian Orchards, which used to grow macadamia nuts on 6,000 acres of the Big Island (500 acres owned). Ebrahimi sold off the brand and its nut product lines, then took it private. He’s presumably enjoying the land—the person answering his phone in Denver said they’d relay a message to him in Hawaii. No word on whether he’s swapped out some macadamia trees for a First Solar panel array.
