Executive Summary / Key Takeaways

• Alternus Clean Energy ($ALCE) is undergoing a significant strategic pivot, shifting from a broad, debt-laden utility-scale solar portfolio towards a more focused transatlantic model emphasizing microgrids, battery storage, and earlier-stage development, aiming for faster revenue and lower capital intensity.
• Recent financial performance reflects this restructuring, with a dramatic decrease in revenue from continuing operations in 2024 due to major asset divestitures and deconsolidations, alongside substantial non-cash gains from the sale of discontinued operations.
• The Company faces substantial doubt about its ability to continue as a going concern, burdened by significant debt, insufficient operating revenues, negative equity, material weaknesses in internal controls, and recent delisting from Nasdaq.
• ALCE's competitive strategy involves entering early-stage development and leveraging partnerships for differentiated offerings like integrated microgrid solutions, aiming to avoid direct competition with large institutional capital for operational assets.
• The investment thesis hinges on the Company's ability to successfully secure necessary project and corporate financing, execute on its new strategic focus areas, and remediate critical financial and operational control deficiencies to capitalize on favorable market tailwinds in clean energy.

Setting the Scene: A Transatlantic Energy Provider in Transition

Alternus Clean Energy, Inc. ($ALCE) presents a complex investment narrative, rooted in the dynamic and rapidly evolving global clean energy sector. Positioned as a comprehensive provider, the Company's core business spans renewable energy generation, historically focused on utility-scale solar and storage facilities feeding national grids under long-term contracts. More recently, its strategic vision has expanded to integrate microgrids and on-site generation systems for corporate clients, a move management believes offers energy resilience, grid independence, and long-term cost savings with the added benefits of faster revenue realization and lower capital intensity compared to large utility projects.

The Company's journey to its current state is marked by significant transformation. Initially a SPAC known as Clean Earth Acquisitions Corp., it completed a business combination with Alternus Energy Group Plc (AEG) in December 2023, effectively becoming the publicly listed entity for AEG's renewable energy assets. This combination brought together a portfolio of assets across North America and Europe, built through a "develop-to-own or sell" model designed to capture value across the entire project lifecycle. This approach, which involves generating a project pipeline through partnerships with local developers and retaining the option to sell assets, aims to minimize upfront capital requirements while building a base of stable, recurring income from owned projects under long-term Power Purchase Agreements (PPAs) or Feed-in Tariffs (FiTs).

However, the period immediately following the business combination has been defined by a dramatic restructuring of the asset base. Facing significant debt obligations and liquidity challenges, the Company undertook a series of major divestitures throughout 2024 and into early 2025. This included the sale of operating parks in Italy (December 2023), Poland (January 2024), the Netherlands (February 2024), and most significantly, the sale of Solis Bond Company DAC and its Romanian subsidiaries (October 2024) to bondholders due to an inability to repay debt. These Romanian entities alone accounted for a staggering 98% of group revenues for the nine months ended September 30, 2024, highlighting the scale of the portfolio reduction. Further deconsolidations and sales of US and Spanish subsidiaries to the parent company (AEG) and related parties followed.

This rapid divestiture has fundamentally reshaped ALCE's operational footprint and financial profile, significantly reducing its asset base and debt, but also its historical revenue streams. The strategic pivot towards microgrids, battery storage, and potentially circular economy energy systems represents the Company's response to both market opportunities (driven by increasing demand from AI, data centers, and industrial onshoring) and the necessity to pursue less capital-intensive, faster-to-revenue projects in the wake of its portfolio restructuring.

Competitive Landscape and Strategic Positioning

The global clean energy market, particularly in utility-scale solar and microgrids, is characterized by intense competition. ALCE competes against a diverse group of players including large renewable energy developers, established Independent Power Producers (IPPs), institutional investors with significant capital, and specialized funds. Competition varies by segment and project stage, with factors like cost of capital, technical expertise, access to pipeline, speed of execution, and the ability to monetize green attributes being critical in the utility-scale market. In the microgrid space, competition comes from vertically integrated solution providers and EPC firms targeting commercial and industrial (C&I) customers.

Key direct competitors in the broader solar market include large manufacturers and developers like First Solar (FSLR), SunPower (SPWR), Canadian Solar (CSIQ), and JinkoSolar (JKS). These companies often possess significant advantages in scale, manufacturing efficiency, and established market share. For instance, companies like JinkoSolar and Canadian Solar benefit from high-volume production, potentially leading to lower manufacturing costs per unit compared to ALCE's current operational scale. First Solar's proprietary thin-film technology offers specific performance advantages in certain conditions.

ALCE's competitive strategy, particularly in its "develop-to-own or sell" model, aims to differentiate itself by entering projects at earlier development stages. This involves cultivating relationships with niche and local developers and securing acquisition rights through strategic agreements like rights-of-first-refusal (ROFR). This approach is designed to reduce exposure to the highly competitive bidding processes for operational assets, where large institutional capital typically dominates.

While larger competitors may boast superior financial metrics (e.g., higher gross and operating margins, stronger current ratios, and lower debt-to-equity ratios compared to ALCE's recent figures, which are heavily impacted by restructuring), ALCE positions itself with a transatlantic market footprint intended to mitigate geopolitical and regulatory concentration risk. Its expansion into microgrids, particularly through partnerships like the one with Hover Energy, is intended to offer unique, integrated solutions combining various technologies (wind, solar, storage, AI-based management) that provide energy resilience and grid independence, catering to a growing demand segment. This move into distributed generation also helps bypass some of the interconnection bottlenecks and transmission congestion challenges faced by utility-scale projects, especially in markets like the U.S.

However, ALCE's competitive standing is significantly challenged by its current financial state and smaller operational scale following the divestitures. The Company's ability to compete effectively on cost of capital and project execution speed is constrained by its liquidity issues and need to secure financing. While its integrated model and early-stage focus offer potential advantages, realizing these advantages requires overcoming the immediate financial hurdles and successfully executing projects in its new strategic focus areas.

Technology and Operational Focus

ALCE's operational strategy is centered around its "develop-to-own or sell" model across both utility-scale and microgrid segments. This involves managing projects from early-stage development through construction and long-term operation. Operational success hinges on factors like efficient project execution, timely grid connection, equipment performance, and effective asset management. The Company's historical operational performance, as reflected in the MWh sold figures for its past portfolio (e.g., 48,247 MWh sold from continuing operations in 2024 vs. 165,463 MWh total in 2023, heavily impacted by divestitures), demonstrates its capability to generate energy from its assets, albeit from a rapidly shrinking base in 2024. Seasonality is a factor for solar assets, with lower production and revenue expected in Q1 and Q4.

Despite lacking proprietary, quantifiable technology differentiators, ALCE's technological differentiation appears to lie in the integration and application of various clean energy technologies, particularly within the microgrid space. The partnership with Hover Energy is a key example, aiming to deliver differentiated microgrid solutions combining rooftop wind, solar, storage, and AI-based energy management systems. The stated benefits of these integrated systems include enhanced energy resilience, grid independence, and optimized energy management for corporate clients. While specific, quantifiable performance metrics for these integrated solutions are not readily available, the strategic intent is clear: to offer a compelling, comprehensive energy-as-a-service (EaaS) solution that meets the rising demand for reliable, decentralized power.

The brief foray into acquiring assets from LiiON LLC's Battery Storage Business in December 2024 (though later rescinded) also signals the Company's strategic intent to build capabilities in energy storage, a critical component for enhancing the reliability and dispatchability of renewable energy, especially for microgrids and grid stability.

The "so what" for investors regarding ALCE's technology and operational focus is that the Company is attempting to carve out a niche through integrated solutions and a flexible development model rather than competing solely on the efficiency or cost of individual components. The success of this approach depends on the ability to effectively execute complex, multi-technology projects and demonstrate the tangible benefits (e.g., cost savings, uptime, resilience) to clients, ultimately translating into profitable, recurring revenue streams that can offset the loss of its historical utility-scale portfolio. The lack of detailed, quantifiable performance data for these integrated solutions makes it challenging for investors to fully assess this aspect of the strategy.

Financial Performance and Liquidity Challenges

ALCE's financial statements for the year ended December 31, 2024, paint a picture dominated by the significant portfolio restructuring. Revenue from continuing operations plummeted to $0.31 million in 2024 from $3.48 million in 2023, a direct consequence of the sale of Italian parks and deconsolidation of US Lightwave parks. Gross margins for continuing operations also compressed significantly (17% in 2024 vs. 63% in 2023) due to the change in asset mix.

Operating expenses for continuing operations increased from $13.77 million in 2023 to $16.57 million in 2024, driven primarily by a substantial rise in selling, general, and administrative (SGA) expenses ($11.98 million in 2024 vs. $4.93 million in 2023). This surge in SGA is attributed mainly to increased audit, consulting, legal, and listing costs associated with being a public company, along with higher insurance expenses. Development costs for continuing operations also increased, reflecting activity on abandoned projects in Spain and the US.

The Company reported a net income of $21.08 million in 2024, a dramatic improvement from the $69.46 million net loss in 2023. However, this positive net income figure is largely attributable to a significant non-cash gain of $53.46 million on the sale of discontinued operations (primarily the Romanian, Polish, and Netherlands parks). The loss from continuing operations actually widened to $24.75 million in 2024 from $32.61 million in 2023, reflecting the reduced revenue base and increased operating costs.

Liquidity remains a critical challenge. As of December 31, 2024, the Company had only $0.16 million in cash and cash equivalents, down sharply from $4.04 million (continuing operations) and a total of $24.56 million (including discontinued operations cash and restricted cash) at the end of 2023.

The balance sheet shows a total shareholders' deficit of $33.89 million as of December 31, 2024. Total debt stood at $30.34 million, with a significant portion ($28.72 million) classified as current maturities.

Management explicitly states that the Company has a working capital deficiency and negative equity, which "raise substantial doubt about our ability to continue as a going concern for twelve months from the issuance of this report." Operating revenues are insufficient to fund operations, and existing assets are pledged to secured creditors. The ability to continue as a going concern is contingent on securing additional financing, renegotiating debt terms, or otherwise raising capital, with no assurance of success. The recent delisting from Nasdaq in February 2025 due to non-compliance with listing rules further exacerbates financing challenges by limiting access to capital markets and reducing liquidity and analyst coverage.

Outlook and Risks

The outlook for ALCE is heavily dependent on its ability to execute its refined strategic vision and, more immediately, to secure necessary funding. The strategic pivot towards microgrids, battery storage, and earlier-stage development in the US and Europe is intended to position the Company for growth in high-demand segments driven by factors like AI and energy independence. Management aims to expand its portfolio in regions with attractive returns and increase long-term recurring revenue. The stated strategy includes optimizing financing sources and reinvesting project cash flows for organic growth, but this is aspirational given the current financial constraints.

While the market tailwinds for renewable energy remain strong globally, ALCE's ability to capitalize on these opportunities is overshadowed by significant risks. The most pressing risk is the substantial doubt about the Company's ability to continue as a going concern. This is directly linked to its insufficient operating revenues, negative equity, and the need to service or refinance its considerable debt obligations, a task made more difficult by the Nasdaq delisting. Failure to secure adequate financing could force the Company to delay, scale back, or abandon strategic initiatives and acquisitions.

Operational risks include the inherent challenges of solar project development (cost overruns, delays, permitting issues) and the potential for performance issues or unplanned outages at operating facilities. The reliance on third-party suppliers for components and contractors for construction exposes the Company to supply chain disruptions and cost fluctuations.

Regulatory and market risks include potential changes to government subsidies and incentives, fluctuations in electricity spot market prices (for uncontracted energy), and evolving interconnection rules. The international nature of the business exposes the Company to foreign currency fluctuations and legal/compliance risks in multiple jurisdictions.

Furthermore, the Company has identified material weaknesses in its internal control over financial reporting, stemming from issues like insufficient qualified personnel, inadequate information sharing, lack of formalized documentation for related-party transactions, and ineffective controls over complex transactions and financial reporting processes. These weaknesses contributed to a restatement of prior financial statements and pose a risk to the accuracy and timeliness of future financial reporting, potentially impacting investor confidence and stock price. Ongoing litigation related to past transactions and debt settlements also presents a financial and operational burden.

The ownership structure, with significant control held by the CEO through super-voting preferred stock, concentrates voting power and could influence strategic decisions.

Conclusion

Alternus Clean Energy is at a critical juncture, attempting a strategic transformation towards potentially higher-growth, less capital-intensive market segments like microgrids and battery storage after shedding a significant portion of its historical utility-scale portfolio. While the long-term vision aligns with powerful market tailwinds and leverages a transatlantic presence and integrated development model, the Company faces immediate and severe financial challenges.

The explicit going concern warning, coupled with insufficient operating revenues, substantial debt, and the consequences of the Nasdaq delisting, represent formidable hurdles. The success of ALCE's pivot and its ability to survive and thrive will depend entirely on its capacity to attract the necessary capital and successfully execute projects in its new focus areas, demonstrating that its strategic adjustments and technological integration capabilities can translate into sustainable, profitable growth and overcome its current liquidity crisis and control deficiencies. For investors, ALCE represents a high-risk, potentially high-reward proposition, contingent on the successful navigation of its acute financial distress and the effective realization of its refined strategic plan.