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It came as a surprise to many when Diona Teh Li Shian announced that her family would reduce its stake in Public Bank Bhd (KL:PBB) to 10% over the next five years. While the timing of the announcement was unexpected, it was a strategic move.

It effectively answered the question as to how the Teh family would comply with the requirement of the Financial Services Act 2013 (FSA), which has restrictions on the shareholding of family companies and individuals in financial institutions. It also put to rest any speculation over the shareholding of the bank’s largest shareholder.

Diona’s late father, Tan Sri Teh Hong Piow, had a 23.41% stake in Public Bank that is worth more than RM20 billion. The block of shares is held through Consolidated Teh Holdings Sdn Bhd and the estate of the late Teh.

Even before Teh passed away, there had always been questions about who would succeed him and what would happen to his block of shares in the bank he founded.

In fact, since 2013, when the FSA came into effect, Bank Negara Malaysia has made it clear that shareholdings in banks are restricted to 20% for institutions and not more than 10% for individuals.

The exceptions to the rule are individuals who held more than 10% before the FSA came into effect by virtue of having founded the financial institution. Apart from Teh, the others who fall into this category are Tan Sri Azman Hashim of AMMB Holdings Bhd and the cigar-smoking Tan Sri Quek Leng Chan of Hong Leong Bank Bhd (KL:HLBB).

The three are known as doyens of the local banking sector who managed to lead their financial institutions through four recessions since the 1980s and one major banking consolidation exercise in 1999/2000.

They were allowed to hold on to their stakes and given exemptions in what was known as the “grandfather rule”. But the rule applies only to them and not to their children or successors.

Azman has 11.8% in AmBank while Quek holds 64.5% in Hong Leong Bank through Hong Leong Financial Group Bhd.

The Teh family’s disclosure could well set the template for the stakes held by Azman and Quek, who have to ensure that their successors comply with the FSA.

Of the two, AmBank has less of a problem because Azman’s stake is just 1.8% above the 10% threshold. All he needs to do is seek Bank Negara’s approval to maintain the stake at 10% and dispose of the excess. Alternatively, his shares can be a merger block for any suitor.

As for Quek, the family’s interest can go up to 20% as the stake is held through HLFG, which is an institution. But it is difficult for HLFG to trim its stake in the bank unless there is a merger, to which Hong Leong Bank is no stranger. In 2014, a research report paired Hong Leong Bank with Public Bank on the rationale that the former wanted a bigger platform and the latter could have succession problems.

Bank Negara’s ‘fit and proper’ test

Coming back to Public Bank, being able to keep a 10% stake can mean a lot for the Teh family as the bank was founded by their father. And any family member or their representative can seek a board seat provided Bank Negara gives its approval. This can be seen at RHB Bank Bhd where OSK Holdings Bhd has a 10.3% stake and its executive chairman Tan Sri Ong Leong Huat sits on the board.

A 10% stake in a bank represents more power than it may appear. It can block or facilitate a potential takeover. This is because in a merger exercise between financial institutions, one bank takes over another through the acquisition of assets and liabilities. In reality, there is no such thing as a merger of equals.

Under the acquisition of assets and liabilities method, the scheme requires 75% shareholder approval and not more than 10% opposing it, which means a 10% block can be an obstacle to a takeover. So while the stake may be small, it is meaningful in a bank, especially if it comes with board representation, which means that the entity and its representative have passed Bank Negara’s “fit and proper” test.

But that 10% interest can also turn out to be inconsequential.

Banks are highly regulated and the central bank keeps a close eye on board changes as it does not allow the banks to fail. The rules have become even more stringent after the 1998 Asian currency crisis. To Bank Negara’s credit, it has ensured that the banking system has not been in danger of a systemic risk as a result of the failure of any bank then.

Since 2000, there have been instances of parties with more than a 10% stake that still had difficulty exerting control over the bank as the shareholder did not pass the “fit and proper” test.

In 2005, when the UBG Group of Sarawak was a substantial shareholder in RHB Capital Bhd, which then controlled RHB Bank, Datuk Seri Sulaiman Abdul Rahman Abdul Taib had to wait eight months before the central bank gave him the green light to be a board member of RHB Capital. The following year, Sulaiman resigned and UBG subsequently disposed of its stake in the bank.

In 2007, Hong Kong fund Primus Pacific Partners bought a 20.2% stake in EON Capital Bhd at a premium. Three years later, there was a boardroom battle, with Hong Leong Bank coming in to acquire EON Bank.

Eventually, Hong Leong Bank took over EON Bank, and approvals from the central bank were relatively faster than normal.

Aabar Investment PJS held 25% in RHB Capital (then the holding company of RHB Bank) in 2011. The investment arm of the Abu Dhabi government wanted to sell its block of shares. In an unprecedented move, both CIMB Group Holdings Bhd and Malayan Banking Bhd received approval from Bank Negara to negotiate with Aabar.

It was unprecedented as Bank Negara does not allow a bidding war for any bank. The deal was finally called off and Aabar sold off its interest in RHB Bank in 2019.

In the next five years, the family of the late Teh will dispose of some 13.4% in the bank to employees, directors and shareholders through a restricted offer for sale. It will cause an overhang of Public Bank shares in the short term but will be good for the bank in the longer term.

Public Bank’s hallmarks are its conservative lending, a strong retail franchise with a good following among small and medium enterprises and a steady group of shareholders with an appetite for consistent dividends. And with the Teh family committed to keeping a 10% stake, the future of the bank remains solid, even if speculation of an eventual merger with another bank is unlikely to go away.

Source: The edge markets

A much-needed green revolution in cement production

Cement is an essential material in today's modern world. It builds our homes, offices, bridges, dams, roads and sidewalks. Each year, we churn out over four billion tons of cement globally from around 4,000 plants, leading to 30 billion tons of concrete, its most common application.

Cement production is, however, a major carbon culprit. It's responsible for 7% of global emissions. If the cement industry were a country, it would rank as the fourth largest emitter, on par with Russia and trailing behind only China, the US, and India.

Emissions from cement are roughly on par with those from the steel industry. This makes cement and steel the top-polluting industrial sectors. Unlike steel, where technology can fundamentally change the production process and eliminate almost all emissions, cement production is inherently CO2-intensive. The chemical transformation of raw materials into cement emits CO2 and there’s no way around that, with these ‘process emissions’ making up 60% of the total. The remaining 40% comes from the high temperatures required (around 1450°C), which are typically achieved by burning coal or plastic waste.

So, what can cement companies do to cut emissions, and at what cost? Fortunately, there are solutions. They can capture and store CO2 permanently or switch to more sustainable heating sources. We dive into these business cases in this article.

According to the International Energy Agency, cement production is set to rise by 17% by 2050 under current policies. Even in their Net Zero Economy scenario, production levels remain close to today’s, highlighting the fact that cement and concrete will continue in their current roles as important building materials.

In turn, we only explore ways to green the production of cement and concrete in this article. For now, we're not delving into ways of reducing demand for cement, for example by substituting concrete by wood in buildings or to optimise the design of buildings.

CCS: The importance of Carbon Capture and Storage

Deploying carbon capture and storage (CCS) is unavoidable without the availability of new technologies that can fundamentally change the chemical process of cement making. CCS is therefore an integral part of any decarbonisation scenario for the sector and can be applied to both the process and heating emissions.

CCS can reduce cement’s emissions by about 85%, based on our assumptions and calculations, which is a big achievement. Additionally, it increases the cost of cement production marginally – by about 10% in our reference case, where CO2 can be transported through pipelines and stored within a 150 km distance. For many cement plants, CCS will be the most impactful and cost effective decarbonisation solution.

Capturing and storing CO2 emissions, along with using cleaner heating fuels, can significantly reduce emissions, though each comes with different costs

Indicative emissions and costs of clinker production

Source: ING Research

Why CCS won't be a near-term solution for every cement plant

The cost of carbon capture and storage varies significantly depending on the location of the site, and cement production facilities are often widely dispersed across a country or region.

For instance, Europe has approximately 300 plants. Some of these are situated near the coast, allowing CO2 to be transported to offshore storage sites via pipelines. Our calculations assume that CO2 can be transported ‘cheaply’. We assume transport via pipelines to an offshore storage location within a maximum distance of 150 kilometres, which is feasible for countries like Norway, the United Kingdom, and the Netherlands. Currently, CO2 pipelines are being developed in the major industrial clusters in these countries, enabling cement plants in these areas to benefit from lower transportation costs. These sites are likely to be the first to apply CCS technology.

Many plants are located inland – far from industrial clusters with CO2 pipelines, but near rivers, allowing CO2 to be transported by ships. However, this method is considerably more expensive, especially for distances up to 500 kilometres. These sites can also apply CCS technology once there are ports available where ships can unload their CO2 shipments.

Additionally, there are cement plants situated deep inland, with no feasible options for CO2 transport via pipelines or ships, even in the future. In such cases, CO2 could be transported by trucks, but this would further increase costs and carbon emissions as it creates many truck movements. CCS won't be applied easily or quickly on these sites.

All in all, the cost to capture, transport and permanently store a ton of carbon from cement production ranges from 50 euro to 200 euro, depending on site location and the transport mode (low cost for pipelines, high cost for ships).

Switching heating sources

Green hydrogen is powerful – but also too costly and precious

Using hydrogen as a fuel is one way to achieve the high temperatures necessary for cement manufacturing. In theory, green hydrogen could replace coal and waste as a heating source. While this wouldn’t reduce process emissions (CCS is required for this), it would cut cement’s overall emissions by a third since the heating process itself wouldn’t emit CO2.

However, there are significant drawbacks to using green hydrogen in the cement industry. Currently, it would nearly double the cost of cement production. The technology is still untested, and there isn’t enough green hydrogen available in the foreseeable future to meet the industry’s vast energy demands.

Moreover, green hydrogen is an extremely valuable resource that could be more effectively used to decarbonise other sectors. In industries like steelmaking, shipping, and aviation, green hydrogen has the potential to transform carbon-intensive processes into fossil-free operations. For example, it can be used to produce synthetic fuels for ships, aeroplanes and trucks, or to eliminate coal in steel production.

These applications of green hydrogen are far more transformative than merely replacing a fossil fuel while leaving the cement-making process unchanged. Other industries are likely to pay higher prices for green hydrogen as a result. We therefore believe that hydrogen will progress quicker in other energy intensive sectors.

Small steps, big impact; marginal improvements matter

So far, we’ve explored the most radical solutions to reduce emissions. Fortunately, there are also smaller, incremental steps that can make a difference. While these measures may not cut emissions by tens of percentage points at each plant, their widespread application across all plants can significantly impact the sector’s total emissions. Sure, they do not eliminate the need to capture and store carbon – but they do limit the extent to which CCS would be needed.

The process of making cement is almost unchanged from when it was first developed, except for increased energy efficiency. Traditional cement kilns have already achieved more than 60% energy efficiency and are unlikely to make significant upgrades, but on a plant level there might be room for improvement. Larger gains can be made by using the residual heat in other industrial processes, or to heat houses by building heating grids.

Using less clinker

Portland cement is the most used cement and has a clinker content of 95%. Clinker can be partially replaced by supplementary cementitious materials, like fly ash from coal power plants and blast furnace slag from steelmaking. This substitution reduces the clinker ratio, cutting down on energy use and avoiding some of the emissions inherent to clinker production. However, as the power and steel sectors in Europe move away from coal, these alternative feedstocks will become less readily available.

Co-processing biomass

Coal products and waste are the most common fuels for generating process heat in cement production. Biomass can also be used for co-firing, although fully substituting it is technically challenging due to the lower caloric value of most organic materials. Sustainably sourced biomass is considered a zero-emission fuel under current guidelines, thereby reducing the carbon footprint of cement. But here too, as with green hydrogen, biomass can add more value in greening other energy-intensive sectors. So, as we move towards a net-zero economy, we expect its use in the cement industry to be constrained by high demand in other sectors.

Applying circular economy principles

Adopting circular economy principles can significantly reduce the demand for cement. This includes optimising structural designs to use less concrete, creating infrastructure that can be easily disassembled for reuse and recycling, and substituting concrete with zero-CO2 materials like wood. An important and interesting topic – but one that we won’t dive into in this article due to its focus on greening cement production.

Greening concrete – turning cement into a carbon sink

While cement’s chemical reaction inherently produces CO2, the same reaction can also be used in reverse order to store CO2 in concrete, the main end product of cement. CO2 injection during concrete production involves introducing captured CO2 into the concrete mix. This chemical process permanently embeds CO2 in the concrete.

Companies like CarbonCure are able to store up to 18 kilograms of CO2 per cubic meter of concrete. This is still a tiny fraction of the 350 kilograms of CO2 that comes with the use of unabated cement in concrete (depending on the type of cement and mixture of concrete, emissions range from 250 to 400 kilograms). But this figure drops to about 50 kilograms of CO2 if the CO2 is captured and stored during cement production.

So, CO2 injection in concrete, together with CCS in cement production, could provide novel solutions and the possibility of carbon neutral cement and concrete in the future. The remaining emissions can be offset in voluntary carbon markets (32 kilograms of CO2 per ton of concrete in our example).

Strategies towards carbon neutral concrete

Indicative impact of CO2 reduction measures in kilograms CO2 per ton concrete

Source: ING Research

The cement industry has a long way to go to achieve carbon neutrality, and both CO2 injection and CCS face significant challenges. These technologies are still in their infancy and come with high costs – that is, if they are available at all.

Innovation in the cement supply chain and further research are crucial to ensure that CO2-injected concrete meets local building codes and standards. Pilot projects can help build the business case for carbon-neutral concrete, making it scalable and cost-effective. Currently, demand isn’t the issue; leading developers and investors are willing to make net zero buildings and pay a premium for it, especially in the high end markets. And policymakers need to meet their emission targets, of which cement takes a fair chunk. This puts pressure on cement producers and policymakers to green the industry site by site.

Appendix: cement’s tech explainer by an economist

The production of cement begins with preparation of the raw materials – limestone, gravel and clay, where they are grinded into fine powder. Cement clinker is then produced by adding the prepared limestone into a cement kiln at a temperature around 1450 degrees Celsius. This allows for the calcination of limestone into cement and CO2. The CO2 is either emitted into the atmosphere or captured and permanently stored with CCS.

Cement production with and without CCS

Source: ING Research

Economic assumptions explained

Costs are calculated from a Northwestern European perspective and based on many economic and chemical assumptions. We list our main economic assumptions here: a gas price of €35/MWh, a power price of €85/MWh, a carbon price of €65/ton with full carbon pricing (no free allowances), and a coal price of €110/ton.

We have applied technology costs of €21/ton/year for a cement kiln that runs 95% of the time (capacity factor). CO2 is captured and transported through pipelines over 150 kilometres to be permanently stored in an offshore empty oil or gas field. We’ve assumed the total cost to capture, transport and store CO2 of €100/ton and the CCS capture rate is set at 85%.

We apply a Western-made alkaline electrolyser that costs around 1,000€/kW and runs with an efficiency of 70% and capacity rate of 70%. This results in green hydrogen costs around €5/kg at a power prices of €85/MWh.

In practice, all these input variables show considerable variation which yields a wide range of outcomes for every technology. We have chosen to present point estimates as they often capture the main insights better than wide ranges. Treat these numbers as indicative outcomes around which real time projects will vary.

This note is part of an ongoing series based around the greening of hard-to-abate sectors. Please find our other updates on the steel, plastics, aviation and shipping industries here.

There’s a niche corner of dealmaking that’s quietly making inroads in the battered market for commercial real estate.

It involves buying buildings with big carbon footprints and investing in green refurbishments. Asset managers Bloomberg interviewed spoke of doubling their clients’ money in just a few years by renovating older buildings, adding 20% to rents and then cashing in on gains when they sell.

As a model for real estate investing, it’s simply “irresistible,” says Paul White, who runs a specialized fund for Hines, a Houston-based developer with more than US$90 billion of assets.

Many investors Bloomberg interviewed said they plan to rely heavily on debt markets to amplify their financial clout, raising the stakes of such wagers. And analysts monitoring the market warn of rising capital expenditure, as well as a lack of skilled labour that could fan wage growth and significantly drive up renovation costs.

Yet speculation on green refurbishments represents a sliver of optimism in a market that not long ago was pummeled by a post-pandemic spike in interest rates and volatile occupancy levels. MSCI Inc said its indexes show that commercial property prices fell about 14% in Europe between March 2020 and June 2024.

Now, a new wave of environmental regulations and tenant preferences has a growing number of CRE fund managers looking to monetize the moment.

Europe’s revised Energy Performance of Buildings Directive went into force this year, and landlords have until the end of this decade to slash greenhouse gas emissions by at least 60% from 2015 levels. Owners of older buildings risk significant writedowns, with lawyers who advise the industry warning of “huge” refurbishment costs ahead.

Landlords that wait too long face a bigger bill further down the road, according to Sven Bienert, project lead at Carbon Risk Real Estate Monitor, which helps the real estate sector tackle emissions. He also says a lot of banks still haven’t grasped just how fast the collateral value of their CRE loans might be shrinking. It’s a “significant risk” on banks’ balance sheets, Bienert said.

There’s evidence that some landlords would rather keep their heads in the sand than realize losses at the point of sale. They’re “disinclined to sell and crystallize the loss,” according to White, who says that’s why Hines hasn’t managed to buy as many properties as it would like. In the end, though, landlords will “have to accept the reality of new regulations,” he said.

For now, flipping brown buildings to make them greener remains a niche undertaking mostly limited to investment managers willing to speculate on the risks. Asset managers creating funds that target the greening of commercial property include billionaire Tom Steyer’s Galvanize Climate Solutions, Fidelity International, Schroders Plc and Ardian SAS.

The stakes are high, with huge swathes of property in the crosshairs. In Europe, as much as 80% of the office market was built more than a decade ago, leaving it outdated and in need of green refurbishment, according to an analysis by Jones Lang LaSalle Inc.

A study published by Deepki, a sustainability-data provider for real estate owners and investors, found that over half of European CRE managers are now sitting on stranded assets equivalent to at least 30% of their portfolios because they don’t meet new green standards.

At the same time, there’s evidence that a growing number are keen to invest in flipping brown buildings into green real estate. Of CRE managers surveyed, 87% “plan to increase the purchase of poor energy-performing buildings with a view to retrofitting them,” Deepki said in the study.

Schroders manages a £460 million (US$600 million) investment trust that’s focused on improving the sustainability of about 40 UK commercial properties. The asset manager recently turned a Manchester warehouse into an operationally net-zero-carbon building, allowing it to charge up to 40% more in rents than older properties on the same estate. Schroder Real Estate Investment Trust says it’s now eyeing rental premiums as high as 30% across the portfolio.

Coima, an Italian asset manager, plans to raise €500 million (US$540 million) for a fund it says will buy, renovate, rent and sell office and residential buildings in Rome and Milan. Fidelity International has a pair of funds targeting office and logistic buildings. Its investment committee initially balked at the high cost of buying and renovating a London office building, but gave the go-ahead when Fidelity negotiated a good price.

Institutional investors are taking note. White says Hines has attracted 35 pension funds and other investors for its €1.6 billion fund dedicated to flipping brown properties into green assets. By the time Hines closes the fund in 2030, the firm expects to have turned that €1.6 billion into at least €4 billion, he said.

“We usually sell pretty quick,” White said. “We can flip a building in three to four years.”

Banks, meanwhile, may not be reflecting the risks of brown real-estate loans on their books.

Priscilla Le Priellec, head of real estate, structured and development lending at La Banque Postale, says her team has rejected loans on environmental grounds only to see the business get absorbed by competitors.

“It’s quite questionable,” she said in an interview.

But ignoring climate risk is likely to come with a sting, especially as insurers retreat from properties found to be unprepared, she said. “You have to make sure that your assets can be insured.”

BNP Paribas SA, the European Union’s largest bank by assets, sold a building in Madrid three years ago for €59 million, a 40% discount at the time relative to comparable grade-A assets in the area. The property is now the subject of a brown-to-green refurbishment project by French private equity firm Ardian.

Edmund Eggins, managing director for real estate at Ardian, says that as an asset, the building was on track to “become stranded by 2030.”

A spokesperson for BNP Paribas declined to comment.

Flipping the property, known locally as Faro, entails rebuilding the entire single-glazed facade, as well as replacing all the air-conditioning and ventilation. New plumbing will cut water use, while solar panels will generate clean electricity and heat. Eventually, a cluster of 900 hidden sensors will constantly monitor and adjust building performance to ensure emissions stay low.

The expected cost is €30 million, or roughly half the purchase price, Eggins says. Ardian, which has so far completed 70% of the work, plans to finish the project by the end of this year, after which it’s aiming for rents between 10% and 20% above the average in the building’s local area.

The goal is to make Faro “the first zero-carbon building in Spain,” Eggins said.

Spencer Corkin, head of value-add strategy at real estate manager AEW in Europe, says that “inefficient or non-compliant assets are at risk of becoming functionally obsolete and illiquid.”

The flipside, according to White at Hines, is that those who invest now stand to ride a sustained wave of growth.

“It is inevitable that the demand for sustainable real estate space will prevail,” he said.

Source: The edge markets

Chronic underbuilding post-2008:

Elevated mortgage rates:

High costs for builders and homeowners:

Despite these challenges, there is potential for improvement. In fact, building activity has already increased significantly in some cities, particularly along the Sunbelt. For other areas, lower rates should spur more housing demand, which could boost builder confidence to increase construction volumes. Additionally, zoning reform efforts are taking place in more than 100 municipalities across the U.S., which could help reduce costs for builders1. While it will take time for supply to meet demand, the recent improvement in homebuilding activity is expected to continue.

Valuations and yields have boosted corporate bond issuance

M&A activity has propelled bond issuance

Money may flow from short-term debt to longer-term bonds

US GDP growth is supporting corporate bonds

The Biden administration finalised rules for a 25% tax credit for semiconductor manufacturing projects, expanding eligibility for what is likely to be the largest incentive programme from the 2022 Chips and Science Act.

The new regulations, which come more than a year after the initial proposed rules, mean that a wider swath of companies will be able to get the tax breaks. That includes businesses that produce the wafers that are ultimately turned into semiconductors, as well as manufacturers of chips and chipmaking equipment.

The credits also will apply to solar wafers — an unexpected shift that could help spur domestic production of panel components. So far, the US has struggled to foster manufacturing of those parts, despite a surge of investment in US panel-making factories.

But the benefits don’t extend all the way up the supply chain. Still excluded are facilities that produce underlying materials like polysilicon, which is used to make wafers. That approach is consistent with how the original law was written, a Treasury official said.

The tax refunds are one of three main subsidy streams available from the Chips Act, which aims to revitalise the American semiconductor industry after decades of production shifting abroad. The law also set aside US$39 billion (RM168.6 billion) in grant funding — more than 90% of which has been allocated, though not yet spent — and US$75 billion in loans and loan guarantees, of which officials are likely to use less than half.

The latter two incentive categories have garnered the most attention — President Joe Biden has even visited factories to herald the announcements — but it’s the tax credits that could be most meaningful for companies. Proposed grants typically cover 10% to 15% of project costs, compared with 25% for tax credits. The idea is to make it just as cost-effective to build a factory in the US as in Asia.

“Our goal is to give you the minimum amount of money necessary to get you to expand on our shores in a way that advances our economic and national security objectives,” Mike Schmidt, director of the Commerce Department’s chips office, said in an August interview when asked about tax credits. “That means looking at all sources of funding and then figuring out how our funds get you over that hump.”

Some companies argued in negotiations that the tax credits shouldn’t “count against” their other funding, Schmidt said — a line of reasoning that didn’t sway government officials.

Chip companies have announced more than US$400 billion in planned US investment over the past several years, including massive factories from leading-edge manufacturers like Taiwan Semiconductor Manufacturing Co and Intel Corp. There also are efforts underway to make older-generation processors and other supplies.

The surge in activity likely means that the Chips Act will be more expensive than anticipated.

The Congressional Budget Office originally estimated that the tax credits would cost US$24 billion in forgone revenue. But the true number could be more than US$85 billion, according to a June report by the Peterson Institute for International Economics that used “very conservative assumptions based on the current investment trends.”

That would exceed the original projected cost of the entire Chips Act, the report said, “resulting in a total cost overrun of nearly 80%.”

Asked whether the Treasury Department has its own cost estimate for the tax credit, an official didn’t provide a specific number. But any overrun could be seen as a win by the Biden administration since it represents additional investments in American manufacturing.

In almost every case, tax credits will account for the greatest share of Chips Act incentives going to any one company. Micron Technology Inc, for example, expects to get around US$11.3 billion in tax credits for two chip factories in New York. That’s compared with US$6.1 billion in grants and US$7.5 billion in loans to support those two facilities plus another plant in Idaho.

Texas Instruments Inc anticipates US$6 billion to US$8 billion in tax credits — as much as five times the size of its Chips Act grant.

Tax credits could also go to the many companies that didn’t win grant money — like Applied Materials Inc — but are still building factories for chips, equipment or wafers. Businesses can get refunds for construction that starts by the end of 2026 and is continuous after that point.

Michigan politicians lobbied hard to extend the tax credit to polysilicon makers as well — in particular, locally based Hemlock Semiconductor LLC. But the Chips Act limited the tax credit to property “integral” to semiconductor production, and Treasury determined that wafers — but not materials — fit that definition.

Hemlock is getting a grant, however. On Monday, the company struck a preliminary agreement for a US$325 million award, which covers a higher share of its project costs than most other Chips Act outlays.

Source: The edge markets