IRA fund halt by US negative for solar exports, says Kotak; cuts targets for Waaree Energies & Premier Energies
IRA fund was likely to disburse $300 billion but halt has been imposed until further notice. While this halt is temporary, it can potentially turn into a complete repeal of IRA incentives.
- Jan 23, 2025,
- Updated Jan 23, 2025 6:03 PM IST
Domestic brokerage firm Kotak Institutional Equities believes that the new US administration’s decision to halt Inflation Reduction Act (IRA) fund disbursements and other green infrastructure funding initiatives and the move is likely to impact both US IPPs and Indian module manufacturers.
The IRA fund was likely to disburse $300 billion but a halt has been imposed until further notice. While this halt is temporary, it can potentially turn into a complete repeal of IRA incentives, which will negatively impact Indian solar manufacturers such as Waaree Energies and Premier Energies. The brokerage firm has cut targets on both the counters, after initiating coverage on them earlier this month with a 'sell' ratings.
Both Premier Energies and Waaree Energies saw a bumper bidding from the investors and delivered multibagger listing pops for the investors on their respective stock market debut in the second half of 2024.
As per the current policy under the IRA AMPC (advanced manufacturing product credit), the US government offers domestic solar manufacturers $0.07 per wall incentive for modules and $0.04 per watt for cells. IRA incentives made module and cell manufacturing very attractive, leading to a slew of capacity addition announcements across the solar value chain.
The new US administration has passed an executive order called 'Unleashing American Energy' aimed at reducing energy costs and, in turn, inflation by harnessing the country’s abundant natural resources. Agencies have been asked to pause disbursement of funds through the IRA and share a report indicating steps to align the IRA with the administration’s policy within 90 days.
The IRA offered investment tax credit and production tax credits―30 per cent and US$0.0275 cents per watt, respectively, for renewable power projects that commence construction by 2032, leading to massive solar and wind capacity addition announcements in the US, said Kotak.
The new executive order from Trump administration will reduce the pace of renewable capacity and solar production capacity addition until there is policy clarity. Further, any increase in import solar tariffs remains uncertain, Kotak noted.
"Given the temporary nature of this order, we have not factored in any impact on Premier or Waaree, and our fair values for Waaree and Premier currently remain unchanged. However, based on our scenario analysis, a complete repeal of IRA will result in a reduction in fair values for both Waaree and Premier to Rs 2,000 ( Rs2,550 in the base-case) and Rs 580 (Rs 770 in the base-case), respectively, Kotak added.
To recall, shares of Premier Energies Ltd were listed on Dalal Street in September 2024 as the company raised a total of Rs 2,830.40 crore via IPO selling its shares for Rs 450 apiece. The stock ended marginally lower to Rs 1037.10 on Wednesday, up 125 per cent from its issue price. Similarly, Waaree Energies raised a total of Rs 4,321.44 crore by selling its shares for Rs 1,503 in October 2024. The stock is up 55 per cent from its IPO price, but still down 38 per cent from its all time highs.
Domestic brokerage firm Kotak Institutional Equities believes that the new US administration’s decision to halt Inflation Reduction Act (IRA) fund disbursements and other green infrastructure funding initiatives and the move is likely to impact both US IPPs and Indian module manufacturers.
The IRA fund was likely to disburse $300 billion but a halt has been imposed until further notice. While this halt is temporary, it can potentially turn into a complete repeal of IRA incentives, which will negatively impact Indian solar manufacturers such as Waaree Energies and Premier Energies. The brokerage firm has cut targets on both the counters, after initiating coverage on them earlier this month with a 'sell' ratings.
Both Premier Energies and Waaree Energies saw a bumper bidding from the investors and delivered multibagger listing pops for the investors on their respective stock market debut in the second half of 2024.
As per the current policy under the IRA AMPC (advanced manufacturing product credit), the US government offers domestic solar manufacturers $0.07 per wall incentive for modules and $0.04 per watt for cells. IRA incentives made module and cell manufacturing very attractive, leading to a slew of capacity addition announcements across the solar value chain.
The new US administration has passed an executive order called 'Unleashing American Energy' aimed at reducing energy costs and, in turn, inflation by harnessing the country’s abundant natural resources. Agencies have been asked to pause disbursement of funds through the IRA and share a report indicating steps to align the IRA with the administration’s policy within 90 days.
The IRA offered investment tax credit and production tax credits―30 per cent and US$0.0275 cents per watt, respectively, for renewable power projects that commence construction by 2032, leading to massive solar and wind capacity addition announcements in the US, said Kotak.
The new executive order from Trump administration will reduce the pace of renewable capacity and solar production capacity addition until there is policy clarity. Further, any increase in import solar tariffs remains uncertain, Kotak noted.
"Given the temporary nature of this order, we have not factored in any impact on Premier or Waaree, and our fair values for Waaree and Premier currently remain unchanged. However, based on our scenario analysis, a complete repeal of IRA will result in a reduction in fair values for both Waaree and Premier to Rs 2,000 ( Rs2,550 in the base-case) and Rs 580 (Rs 770 in the base-case), respectively, Kotak added.
To recall, shares of Premier Energies Ltd were listed on Dalal Street in September 2024 as the company raised a total of Rs 2,830.40 crore via IPO selling its shares for Rs 450 apiece. The stock ended marginally lower to Rs 1037.10 on Wednesday, up 125 per cent from its issue price. Similarly, Waaree Energies raised a total of Rs 4,321.44 crore by selling its shares for Rs 1,503 in October 2024. The stock is up 55 per cent from its IPO price, but still down 38 per cent from its all time highs.