Executive Summary / Key Takeaways

• Strategic Pivot to Microgrids: Alternus Clean Energy (ALCE) is undergoing a significant strategic shift, moving beyond its traditional utility-scale solar operations to focus on high-growth microgrids and on-site generation systems, exemplified by its recent joint venture with Hover Energy LLC.
• Financial Turnaround Amidst Restructuring: The company reported a net income of $5.10 million for the first half of 2025, a substantial improvement from a $9.90 million loss in the prior year, primarily driven by strategic asset divestitures totaling $15.50 million in gains.
• Technological Differentiation: Through its partnership with Hover Energy, ALCE is deploying differentiated microgrid solutions that integrate rooftop wind, solar, storage, and AI-based energy management, aiming for superior energy resilience and cost savings for commercial and industrial clients.
• Addressing Going Concern and Liquidity: Despite improved net income, ALCE faces substantial doubt about its ability to continue as a going concern, grappling with insufficient operating revenues, pledged assets, and ongoing debt obligations, necessitating aggressive pursuit of project financing and further cost rationalization.
• Transatlantic Growth Ambition: ALCE maintains a vision for capital-efficient growth and a diversified transatlantic market footprint, leveraging strategic partnerships and a technology-agnostic approach to capitalize on the rapidly expanding global demand for sustainable and reliable energy, particularly from sectors like AI and data centers.

A New Dawn for Alternus: From Utility Solar to Distributed Energy Leadership

Alternus Clean Energy, Inc. (ALCE) is a renewable energy company committed to advancing sustainable solutions, primarily focusing on utility-scale projects such as solar parks, microgrids, and battery storage across Europe and the United States. The company's journey has been marked by significant strategic evolution, particularly following its business combination in December 2023, which saw it transition from Clean Earth Acquisitions Corp. to its current identity. This transformation has been characterized by a deliberate shift in focus, aiming to capitalize on the burgeoning demand for resilient and independent energy solutions.

The global energy landscape is undergoing a profound transformation, driven by strong regulatory tailwinds and an escalating demand for sustainable and reliable power. This trend is further amplified by the rapid expansion of energy-intensive sectors such as artificial intelligence (AI), data centers, and industrial onshoring, all of which require consistent and robust power supplies. The continued reduction in the cost of solar and other renewable energy technologies is pushing markets towards grid parity, while the challenges of aging transmission infrastructure make distributed generation increasingly competitive. In this dynamic environment, ALCE is strategically repositioning itself to become a more comprehensive energy provider, broadening its market reach and enhancing its financial performance.

Central to ALCE's evolving strategy is its emphasis on differentiated microgrid solutions, a key technological differentiator in a competitive market. Through partnerships, notably with Hover Energy, ALCE is deploying advanced microgrid systems that integrate rooftop wind, solar, battery storage, and AI-based energy management. This technology offers tangible benefits over traditional grid reliance, providing customers with enhanced energy resilience, greater independence from the grid, and long-term cost savings. These customer-deployed systems are designed for faster revenue realization and lower capital intensity compared to large-scale utility projects. The joint venture with Hover Energy LLC, finalized in September 2025, involved ALCE selling a 49% interest in its subsidiary, EverOn Energy LLC, and issuing Series B Convertible Preferred Stock to Hover. In return, Hover contributed a substantial pipeline of wind-powered microgrid projects and clients in the UK and the US. Management has initially valued the future revenue streams and income from these projects at over $50 million, subject to third-party valuation, underscoring the potential impact of this technological pivot on the company's long-term financial health. This strategic move aims to provide a compelling and exclusive offering, particularly in the high-growth commercial and industrial market segments.

In the competitive arena, ALCE operates in a rapidly changing environment. While larger, more diversified players like NextEra Energy (NEE) and Brookfield Renewable Partners dominate with their extensive portfolios and financial might, ALCE carves out a niche with its vertically integrated model and specialized focus on midsized solar parks and microgrids. This integrated approach, encompassing development, installation, and operation, offers ALCE greater operational control and potentially faster project execution in its targeted markets. Against solar technology specialists like First Solar (FSLR), known for its advanced thin-film modules, ALCE's differentiation lies in its end-to-end project management and integrated solutions. Similarly, compared to SunPower (SPWR), which focuses on diverse residential and commercial solar offerings, ALCE's utility-scale and microgrid focus allows for specialized efficiency in larger, tailored projects. ALCE's strategy to strengthen long-term relationships with high-quality developers and partners is designed to reduce acquisition competition and secure exclusive project rights, providing a competitive edge in securing grid access, permits, and financing in highly competitive markets.

Financial Performance and Operational Restructuring

Alternus Clean Energy's recent financial performance reflects a company in the midst of a significant operational and strategic overhaul. For the six months ended June 30, 2025, ALCE reported a net income from continuing operations of approximately $5.10 million, a stark improvement from a net loss of $9.90 million in the comparable period of 2024. This positive shift was predominantly driven by substantial gains from the sale of subsidiaries, including the MH02 and Italian subsidiaries, which contributed $15.50 million for the six months ended June 30, 2025.

Despite this improvement in net income, revenue from continuing operations declined for both the three and six months ended June 30, 2025, compared to 2024. This decrease is a direct consequence of the company's strategic divestitures, as ALCE did not own any operating parks in 2025 following the sale of Lightwave parks in November 2024. Similarly, revenue from discontinued operations saw a substantial decrease of $6.00 million for the six months ended June 30, 2025, due to the sale of all operating parks in Poland, the Netherlands, and Romania in 2024. These divestitures, particularly the sale of Solis and its Romanian subsidiaries on October 3, 2024, were a critical component of the company's restructuring, eliminating approximately $115 million in debt and payables and improving shareholders' equity by about $59 million.

Operating expenses also saw significant movements. Selling, general and administrative (SGA) expenses for continuing operations increased by $0.90 million for the three months ended June 30, 2025, largely due to $2.10 million in non-cash stock compensation costs. However, for the six-month period, SGA expenses decreased by $0.70 million compared to the prior year, attributed to reductions in compensation, consulting, insurance, and accounting/legal costs, partially offset by the aforementioned stock compensation. The Chief Operating Decision-Maker (CODM) now primarily uses EBITDA as a key metric to evaluate segment performance and allocate resources, reflecting the shift in the company's asset base and revenue streams.

From a profitability perspective, ALCE's latest TTM Net Profit Margin stands at an exceptionally high 31893.55%, primarily a result of the significant gains from asset sales. However, the TTM Gross Profit Margin of -174.19% and Operating Profit Margin of -332.26% indicate underlying challenges in generating operational profitability from its current revenue base. This contrasts with more established competitors like NextEra Energy, which typically exhibits robust operating margins from its diversified renewable energy portfolio.

Liquidity, Capital Resources, and the Path Forward

Alternus Clean Energy faces significant liquidity challenges, with management explicitly stating "substantial doubt about its ability to continue as a going concern for a period of one year" from the filing date. This assessment stems from recurring operational losses and continued cash outflows, coupled with operating revenues being insufficient to fund operations and existing assets already pledged to secure indebtedness.

To address these critical issues, ALCE is actively working with multiple global banks and funds to secure necessary corporate and project-level financing for its transatlantic business plan. The company's financing strategy emphasizes project-specific non-recourse borrowings at its subsidiaries and plans to fund future acquisitions and capital expenditures primarily through long-term non-recourse debt, retained cash flows from operations, and equity issuances.

However, the path is fraught with challenges. The company has experienced troubled debt restructurings, such as the Secure Net Note Agreement, where the Original Issue Discount (OID) increased to 45% as of June 30, 2025, and the maturity date was extended multiple times. Furthermore, promissory notes with an aggregate principal amount of $2.81 million, issued in January 2025, matured in April 2025 and remained unpaid as of June 30, 2025, indicating a default. These events highlight the ongoing financial strain and the critical need for successful financing initiatives.

On the operational front, net cash provided by continuing operating activities increased by $0.60 million for the six months ended June 30, 2025, compared to 2024, largely due to the gains from asset sales. Net cash provided by continuing financing activities decreased by $2.50 million in the same period, mainly due to lower operating costs from management's cost rationalization programs, with approximately $1.50 million in new debt raised in 2025.

The company's common stock was delisted from the Nasdaq Capital Market on February 12, 2025, due to non-compliance with listing rules, and is now quoted on an over-the-counter trading market. This delisting was a significant factor in the rescission of the LiiON LLC battery storage business acquisition in May 2025, as it impacted ALCE's ability to raise equity funding for integration. To improve its market standing and compliance, ALCE undertook a one-for-25 reverse stock split in October 2024 and a one-for-two hundred reverse stock split in September 2025.

Risks and Competitive Positioning

The investment thesis for ALCE is tempered by several significant risks. The "going concern" warning remains paramount, as the company's ability to secure sufficient financing is critical for its survival and growth. The delisting from Nasdaq limits its access to capital markets and investor visibility, potentially hindering future equity raises. The company also faces ongoing litigation risks, including an arbitration award of $5.70 million to Sunrise Development LLC and a summary judgment of $1.50 million plus interest and fees to SPAC Sponsor Capital Access (SCAF). These legal liabilities add to the financial burden and divert management resources.

Furthermore, ALCE is exposed to government policy risks, where changes in incentives or the imposition of new taxes on renewable energy could adversely affect project economics and returns. Internal control weaknesses, including insufficient accounting personnel and inadequate controls for related party and complex transactions, pose a risk of material financial misstatements. The broader macroeconomic environment, characterized by geopolitical conflicts, inflation, and rising interest rates, continues to impact energy rates and the cost of capital, adding further pressure.

Despite these challenges, ALCE's strategic pivot towards microgrids and its partnership with Hover Energy position it with a differentiated offering in a competitive market. While larger players like Brookfield Renewable Partners (BEP) benefit from global scale and diversified assets, ALCE's focused expertise in midsized solar parks and integrated microgrid solutions could allow it to capture specific market segments more efficiently. Its technology-agnostic strategy enables it to source best-in-class components globally, optimizing costs and adapting to emerging innovations. The company's commitment to building long-term relationships with developers also aims to secure projects in less competitive environments.

Conclusion

Alternus Clean Energy is at a critical juncture, undergoing a profound strategic reconfiguration to transform its business model and address significant financial challenges. The company's pivot towards differentiated microgrid solutions, particularly through its joint venture with Hover Energy, represents a compelling narrative for future growth, aiming to tap into the escalating demand for resilient and sustainable energy from sectors like AI and data centers. This technological differentiation, combining rooftop wind, solar, storage, and AI-based energy management, offers a unique value proposition in a competitive landscape.

While the recent financial performance shows a positive shift in net income driven by strategic asset divestitures, the underlying "going concern" warning and liquidity constraints underscore the urgent need for successful project financing and continued operational efficiency. The delisting from Nasdaq and ongoing legal liabilities add layers of complexity to ALCE's path forward. However, the company's strategic initiatives, including its transatlantic market footprint and technology-agnostic approach, are designed to build a foundation for sustained value creation. For discerning investors, ALCE represents a high-risk, high-reward opportunity, where the successful execution of its microgrid strategy and the resolution of its financial challenges could unlock significant long-term value in the rapidly evolving clean energy sector.