Vestas Wind Systems jumped the most in years after the Internal Revenue Service issued revised guidance on U.S. wind and solar tax credit eligibility that proved far less restrictive than initially feared top Wall Street desks.
President Trump’s tax and spending bill dialed back the Biden-Harris regime era renewable subsidies, allowing credits only for projects starting within a year or in service by 2027. Wall Street analysts feared strict rules, but the new IRS guidance, issued last Friday, clarified what counts as “beginning construction” in a way analysts called “close to the best possible outcome.”
Analysts at Jefferies, Citi, RBC, and Goldman all viewed the IRS rule change as more favorable than anticipated.
“We see close to the best possible outcome in the guidance compared to initial talks,” analysts at Jefferies wrote in a note to clients.
Goldman analyst Ajay Patel told clients Monday that the revised rule removes yet “another uncertainty” for Vestas.
Patel explained more:
US IRA: Revised guidance better than feared… On Friday, the Internal Revenue Service issued its revised guidance for wind and solar tax credit eligibility, stating that a Physical Work Test must be satisfied for projects that have begun construction by July 5, 2026 to qualify, as part of their review on sections 45Y and 48E of the Internal Revenue Code for wind and solar facilities. The new guidelines are only applicable for projects starting construction from September 2, 2025. i.e. a proportion of the current U.S. onshore wind pipeline.
The Physical Work Test requires that “physical work of a significant nature” has begun, focusing on the nature of work rather than the amount of the cost. This replaces the previous legislation within The One Big Beautiful Bill Act, which had stated that projects are eligible for wind and solar tax credits if they had started construction by July 2026, defined as 5% of capex, or had been placed in service by the end of 2027. The new guidance states that both off-site and on-site work may be considered to demonstrate physical work of a significant nature, with off-site examples including the manufacturing of components or mounting of equipment, and on-site examples including the beginning of the excavation for the foundation or the setting of anchor bolts into the ground. The guidance explicitly states that physical work of a significant nature does not include preliminary activities, even those such as clearing a site or excavation to change the contour of a land (separate from excavation for a foundation). Further, for facilities that are in service by the end of a calendar year that is no more than four calendar years after the calendar year during which construction began, the project is considered to satisfy the Continuity Requirement, and is eligible for credits.
Another uncertainty clear for Vestas … We would see the clarity given as a positive for Vestas. American Clean Power (See link) point to a potential 28GW land based wind pipeline. Now we have clarity, and we see a strong order uptick over the coming quarters for Vestas as part of the pipeline converts. We see the tide starting to turn as we progress through H2. Profitability and cash flow should sizeably improve which will likely increase the debate around additional cash returns to shareholders. Higher U.S. order activity should paint a better picture for top-line growth. Working through the ramp-up of offshore this year should reduce the risk it presents.
We expect the Vestas story to gain momentum as we progress over H2, and we remain Buy rated.
In markets, Vestas shares in Copenhagen jumped sharply, up 15.7% – the largest daily increase since July 28, 2022, when shares rose 15.8%. High interest rates, inflation, and the broader downturn in the green energy industry in the Trump era have battered the stock.
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