Project finance

How one small Canadian solar company is making use of the IRA

Heliene Solar president Martin Pochtaruk said the company’s decade of experience is a boon as it pursues new project finance.

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Solar manufacturing

Photo credit: Dustin Chambers / The Washington Post via Getty Images

Solar manufacturing

Photo credit: Dustin Chambers / The Washington Post via Getty Images

For Heliene Solar, the passage of the Inflation Reduction Act couldn’t have come at a better time.

The small solar manufacturer headquartered in Ontario had already made some inroads into the United States market via a factory in Minnesota. But while other foreign companies began building manufacturing facilities in the U.S. in response to the law’s passage, Heliene had just happened to expand its existing building to host a new manufacturing line mere months before. 

Though the decision to make the investment came a full year prior, the company’s president and co-founder Martin Pochtaruk said “it might have been the first manufacturing line starting up after the passing of the IRA.” 

In the years since, though, Heliene has taken more intentional advantage of the law.

  • The top line: The IRA is bringing Heliene a huge swath of new customers, and its preexisting foothold in the U.S. has left the company well-positioned to take immediate advantage of the law’s incentive structure, and the new demand it spurred. And as its larger competitors also move to take advantage of the law, the company is doubling down on automation in its manufacturing process and pursuing new types of financing to keep up with the reshaped market. 
  • The market grounding: It’s a complicated time to be a U.S. solar manufacturer. On the one hand, the country is installing more solar than ever before, and the IRA is contributing to new demand for modules — especially those made domestically. On the other, the country is facing both a glut of imported solar panels that are dragging down prices to the point where domestic suppliers are struggling to keep up, and the uncertainty of an election year. 
  • The current take: Heliene is benefitting from both the general IRA-bolstered solar build-out in the U.S., and the law’s specific requirement for domestic content: “Most of our clients are targeting to access the extra 10% tax credit” that results from 40% of a project’s components being produced domestically, Pochtaruk said. “So that is really what is allowing us to grow our sales network.”

Today, Heliene has just about 100 employees in Canada and 250 in the United States. It sells mainly to ground-mount installations on both large and small projects, the bulk of which are funded through debt and tax equity. The company has both commercial and industrial clients as well as community solar; the slate includes Altus Power, Solar Landscapes, and a decade-long relationship with Nexamp. 

But back when it was founded in 2010, Heliene had a very different purview. The company was founded as a family firm in Ontario, Canada. Its purpose, initially, was to supply Ontario’s feed-in tariff market, which emerged as a result of a government program to entirely replace coal generation in the province with renewables, using equipment purchased from within the province. 

However, Pochtaruk said that within four years it was clear that the volume requirements of the program — which resulted in “spasmodic” contracts — were not enough to sustain the company in the long-term. Heliene instead ended up primarily making modules for export to Europe, where demand for solar at the time was significantly higher than in either Canada or the United States. 

But the company began to focus on the U.S. market nonetheless, and especially on projects that required either tax credit financing or debt financing. By 2017, demand from the U.S. had increased to the point where Heliene took over a long-term lease on an existing factory in Minnesota to more directly supply the market.

And the months pre-IRA in 2022 were when the company began to build an expansion on the existing building to host a new manufacturing line, which started production that November. 

The upgrades in the years since — one last year to replace a line built in 2018, and a capacity expansion that is currently underway — were “facilitated by the acceleration of the demand” in light of the law’s passage, Pochtaruk said. (The current expansion, he added, “is 100% IRA-triggered.”)

But to keep up with the growing demand — and its bigger peers both in the U.S. and especially in Asia — Heliene has had to innovate on its manufacturing process. 

The company has found that the labor costs need to be under one cent per watt in order to compete with its peers importing from Asia, even accounting for the IRA’s incentives. And the way Heliene gets labor costs that low, Pochtaruk said, is by “automating the heck out of it.” 

Each manufacturing line has fewer than 20 employees per shift, and produces a module every 24 seconds on average, Pochtaruk said. “There’s no human touch on a module,” he added; employees primarily work on bringing in materials, removing modules from the line, and controlling for quality. 

Since November of 2022, Heliene has also used artificial intelligence to detect microcracks in solar cells: “Because of the speed that this is happening, the human eye cannot find anything,” Pochtaruk added.

The new project finance conversation 

Even though Heliene is significantly smaller than many of its peers, its years in the field both in Canada and in the U.S. give it something no money can buy: a degree of trust from investors, borne from experience.

“Financing for private projects has always been difficult,” Pochtaruk said. “You are rowing in honey…it could not be more difficult.”

And in his experience, most manufacturing projects without pre-IRA history are having problems obtaining financing, mostly because of the sheer fact of their newness. Heliene, in contrast, is “an ongoing concern, as accountants would call it,” he added.

In 2023, the company used this position to close the first third-party equity raise in the history of the company. The investment fund Orion Infrastructure Capital invested $5 million in equity and $150 million in credit for a new facility announced last summer, which will be in the Twin Cities region, with an annual capacity of roughly one gigawatt of modules and 1.5 gigawatts of cells. 

Pochtaruk said the decision to go after this third-party equity financing came because Heliene was ready to pursue faster growth, in light of the IRA being “there to help.” It was a two-step equity raise; the second round is currently in the works, and Heliene plans to close the round before the end of this month. 

One game-changing element of the IRA has been the newfound ability to transfer and possibly sell investment tax credits.

“That is the main benefit for us, a manufacturer, of the IRA: reducing debt and using that incentive to basically be more sustainable,” Pochtaruk said, adding that the access to more potential cash flow is “a great thing” whether a company chooses to use it for working capital or to reduce its debt.

“This is a further reason why we’re investing in more manufacturing lines in the U.S. and not in Canada,” he added. 

Asked to what extent the IRA more broadly was a part of conversations with investors, Pochtaruk said it’s “always” present, because of the market certainty it provides for module demand. 

“Our limitation to grow in the past has always been access to working capital,” Pochtaruk said. “When you go to a bank and you say I'm a solar equipment manufacturer, the banks will look at you and say, ‘Well, you're not oil and gas, you haven't been around for 150 years, so we're not going to lend to you.’ As ridiculous as it is, that is what you hear more times than not.”

But having the U.S. Treasury — via the structure of 45X solar manufacturing credits, which were updated in December 2023, in particular — as Heliene’s receivable reduces the company’s credit risk significantly. 

“Lenders are okay with it,” Pochtaruk said. “I’m not saying that they love it, because they don’t love anything, but they like it.”

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