Executive Summary / Key Takeaways

• Strategic Pivot to Energy Storage: Smart Powerr Corp. (CREG) is undergoing a profound transformation, shifting from its historical waste-to-energy leasing model to become an integrated energy storage solution provider, targeting high-growth segments like industrial complexes, PV/wind stations, and smart cities in China.
• Recent Financial Stabilization & Liquidity: Despite an accumulated deficit and recent operating losses, CREG reported a strong cash position of \$131.11 million and positive operating cash flow of \$64.50 million for the first six months of 2025, driven by significant recoveries of advance payments and short-term loans.
• Technological Reorientation: The company's future hinges on applying advanced energy storage technologies, building upon its historical expertise in waste heat/gas recovery, to develop integrated solutions for a modern, low-carbon energy infrastructure.
• Competitive Niche in China: CREG aims to leverage its localized expertise and integrated service model to compete effectively against larger, more diversified global players in the burgeoning Chinese energy market, which is strongly supported by government "dual carbon" goals.
• Execution Risk & Capital Structure Optimization: The success of this ambitious strategic pivot carries inherent execution risks, though recent equity issuance and a 1-for-10 reverse stock split signal management's commitment to strengthening its capital structure for future growth.

A New Dawn for Smart Powerr: From Waste Heat to Energy Storage Leadership

Smart Powerr Corp., formerly known as China Recycling Energy Corporation, stands at a pivotal juncture, shedding its legacy as a waste-to-energy system lessor to embrace the burgeoning opportunities in integrated energy storage solutions within China. This strategic metamorphosis is not merely a rebranding; it represents a fundamental reorientation of its business model, technological focus, and market aspirations, driven by both past operational challenges and a forward-looking vision for China's ambitious "dual carbon" goals. The company's journey, rooted in providing energy-saving solutions to China's energy-intensive industries, now pivots towards a future where energy storage is paramount.

Historically, CREG carved a niche by designing, financing, constructing, and installing waste energy recycling projects for mid-to-large enterprises in sectors like steel, cement, and nonferrous metals. Its core technological offerings included waste gas power generation (WGPG) systems, which convert flammable industrial waste gases (e.g., blast furnace gas, coke furnace gas) into electricity, and waste heat power generation (WHPG) systems, which utilize industrial waste heat to produce steam for electricity generation via steam turbines. These technologies provided tangible benefits by reducing energy consumption and emissions for its clients, aligning with China's long-standing environmental protection mandates. The company's business model revolved around sales-type financial leases, generating one-time revenue from system sales upon completion and recurring interest income over the lease term, supplemented by contingent rental income from actual electricity usage.

However, this traditional model faced headwinds, including early lease terminations in 2014-2015 due to client business restructuring and investment consolidation changes in China. By 2025, a significant shift was evident: CREG had disposed of its previous systems, with its remaining five power generating systems through Erdos TCH no longer producing electricity. This backdrop underscores the necessity and urgency of the company's strategic pivot.

Technological Evolution and the Energy Storage Frontier

The transformation into an energy storage integrated solution provider marks a significant technological evolution for Smart Powerr Corp. While its historical expertise lay in capturing and converting waste energy, the new focus demands proficiency in advanced battery technologies, grid integration, and smart energy management systems. The company is actively exploring opportunities to apply energy storage technologies to high-growth segments, including industrial and commercial complexes, large-scale photovoltaic (PV) and wind power stations, remote islands without electricity, and comprehensive smart energy cities.

A critical step in this new direction was the strategic cooperation agreement signed in March 2025 with Shidai Huazhi (Jiangsu) Energy Technology Co., Ltd. This partnership aims to build an "integrated industrial ecology of photovoltaic, energy storage, charging and inspection." The stated goals of this initiative are to accelerate the upgrading of urban energy infrastructure and inject innovative momentum into the construction of a new power system, directly supporting China's "dual carbon" objectives. While specific quantitative performance metrics for CREG's new energy storage technologies are not yet publicly detailed, the strategic intent is clear: to leverage these integrated solutions to enhance energy efficiency, grid stability, and renewable energy adoption, thereby creating a new competitive moat. This technological pivot is foundational to CREG's long-term growth strategy, aiming for higher-value, recurring revenue streams from the operation and maintenance of these advanced systems.

Competitive Landscape and Strategic Positioning

Smart Powerr Corp. operates within a dynamic and increasingly competitive energy sector. While its historical waste-to-energy business faced competition from larger, diversified global players like Veolia Environment (VEOEY), Suez SA (SEV), and Waste Management Inc. (WM), its new energy storage focus places it in a different arena. These global giants, with their extensive resources and broader service portfolios, often benefit from economies of scale and diversified revenue streams. For instance, Veolia Environment's gross profit margin for 2024 stood at 17%, Suez SA's at 0%, and Waste Management Inc. 's at 29%, contrasting sharply with CREG's TTM gross profit margin of -30.94% as it transitions.

CREG's strategy to compete against these formidable players hinges on its specialized, integrated approach within the Chinese market. Its ability to offer end-to-end solutions, including project financing, construction, and operation, tailored to local industrial needs, could provide a distinct advantage. This localized expertise and integrated service model may enable faster project deployment and stronger customer relationships in China, where larger global players might face more bureaucratic hurdles. However, CREG's smaller scale and geographic concentration in China present vulnerabilities, exposing it to higher regional economic and regulatory risks compared to its globally diversified counterparts. The company's potential lags in R&D investment and technological breadth, particularly in the rapidly evolving energy storage domain, could also challenge its ability to match the innovation speed and efficiency advantages of its larger rivals.

Financial Performance and Liquidity: A Transitional Picture

The financial performance of Smart Powerr Corp. for the six months ended June 30, 2025, reflects a company in the midst of a significant transformation. Total revenue for this period was \$82,839, primarily derived from a new 10-year Operation and Maintenance (O&M) contract for a power station, valued at RMB 1.8 million (US \$0.2 million), which commenced in March 2025. This contrasts sharply with the historical model of generating revenue from system sales, which stood at \$0 for the period, underscoring the shift away from its legacy business. The gross profit from these O&M services was \$35,421, yielding a gross margin of 43%.

Despite this revenue, the company reported a net loss of \$2.13 million and an operating loss of \$2.19 million for the six months ended June 30, 2025. Total operating expenses surged to \$2.22 million, a 298% increase year-over-year, largely driven by higher financing costs and a one-time \$831,520 share-based compensation expense.

However, a critical highlight for the period was the significant improvement in liquidity. CREG ended June 30, 2025, with a robust cash and equivalents balance of \$131.11 million, a substantial increase from \$25,341 at the end of 2024. This surge in cash was primarily fueled by the recovery of \$65.60 million in advance payments to suppliers and the collection of a \$55.66 million short-term loan receivable, alongside \$9.87 million from equity issuance. These inflows resulted in a positive operating cash flow of \$64.50 million for the period.

While the company carries an accumulated deficit of \$64.19 million, management asserts that it possesses sufficient cash to fund operations for the next 12 months, supported by these recent cash recoveries and capital raises. The current ratio stands at a healthy 10.00, indicating strong short-term liquidity. However, the company's ability to sustain profitability remains contingent on the successful execution of its new energy storage business strategy.

Outlook, Guidance, and Key Risks

Smart Powerr Corp.'s outlook is firmly anchored in its strategic pivot towards energy storage solutions. Management plans disciplined and targeted expansion into new market areas, actively seeking opportunities to apply its evolving technologies to high-growth segments. The recent strategic cooperation agreement in March 2025 provides a concrete roadmap for this expansion, focusing on an integrated industrial ecology of photovoltaic, energy storage, charging, and inspection. This initiative is expected to be a key driver for future revenue and profitability, leveraging China's supportive macro policy environment for energy conservation and emission reduction.

However, this ambitious transformation is not without significant risks. The company's operations are concentrated in the PRC, exposing it to political, economic, and legal environment shifts, as well as foreign currency exchange risks. A notable concern is ongoing litigation, including a lawsuit from Beijing Hongyuan Recycling Energy Investment Center (Hongyuan) against Xian TCH, which has resulted in judgments and accrued litigation expenses of \$2.10 million as of December 31, 2024, with interest on a repaid loan still outstanding. The company also faces the inherent execution risk associated with a major business model shift, particularly in a capital-intensive and technologically evolving sector. While management expresses confidence and has taken steps like a 1-for-10 reverse stock split in July 2025 to optimize its capital structure, the "going concern" qualification in its financial statements underscores the dependency on the successful execution of its new strategy to achieve sustained profitability.

Conclusion

Smart Powerr Corp. is embarking on a transformative journey, pivoting from its historical waste-to-energy operations to become a player in China's rapidly expanding energy storage market. This strategic reorientation, marked by a new focus on integrated PV, energy storage, charging, and inspection solutions, positions CREG to capitalize on the nation's aggressive "dual carbon" goals and the growing demand for sustainable energy infrastructure. While the company's recent financial performance reflects a transitional phase with operating losses, its robust cash position, bolstered by significant asset recoveries and equity issuance, provides essential liquidity for this pivot.

The investment thesis for CREG hinges on its ability to successfully execute this strategic shift, leveraging its localized expertise and integrated service model to carve out a competitive niche against larger rivals. The company's technological leadership in its new domain, particularly through strategic partnerships, will be critical in driving future growth and profitability. Investors should closely monitor the progress of its energy storage projects, the resolution of ongoing legal matters, and the company's capacity to translate its strategic vision into sustained operational and financial success in a dynamic and competitive landscape.