Deep Dive: Alternus Clean Energy’s 2024 10-K Report

Alternus Clean Energy, Inc. (OTCQB: ALCE) recently filed its annual 10-K for the fiscal year ended December 31, 2024. This report covers the company’s transition from a special-purpose acquisition company (SPAC) to an independent clean-energy operator specializing in utility-scale solar and microgrid solutions. Here’s a comprehensive review of the most important takeaways from the filing.

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1. Company Overview and Business Model

Corporate History

• Incorporated in Delaware on May 14, 2021, initially named Clean Earth Acquisitions Corp.
• Closed its SPAC merger on December 22, 2023, with Alternus Energy Group Plc (AEG) as the accounting acquirer.
• Changed its name to Alternus Clean Energy, Inc. post-closing.

Core Activities

• Utility-scale solar: Develop, construct, and operate solar parks under long-term Power Purchase Agreements (PPAs) or feed-in tariffs (FiTs).
• Microgrids & behind-the-meter: Partner with Hover Energy and other specialists to deploy on-site wind, solar, and battery solutions for commercial and industrial clients.
• Asset staging: Acquire projects at various development stages—from early-stage rights to operating facilities—then either hold for recurring cash flows or sell when profitable.

Value Creation Engine

• Develop-to-own-or-sell model captures value at each milestone:

1. Land/site rights & permitting
2. Grid interconnection agreements
3. Engineering, procurement, & construction (EPC)
4. Commercial operation

• ~70% of power rates hedged long-term to secure predictable revenue streams and enhance financing flexibility.
• Optionally flips assets at a premium if certain projects don’t meet long-term return thresholds.

2. Geographic Footprint and Segment Overview

Europe (Former Portfolio)

• Ex-SPC assets in Italy, Poland, the Netherlands, and Romania were sold during 2023 and 2024.
• Yielded net gains of €1 and €53 million from the sale of Romanian Solis parks in October 2024.
• Eliminated €100 million+ of debt from the balance sheet, boosting shareholders’ equity by approximately $59 million.
• Spanish development: Acquired project rights for 32 MWp in Valencia, Spain, financed by a €3 million bank loan ($3.3 million).

United States & Microgrids (Current Portfolio)

• North America is the focus area moving forward under Inflation Reduction Act incentives.
• Microgrid JV: Hover Energy partnership delivering combined wind, solar, storage, and AI-driven energy management for C&I clients.
• Current operating capacity is modest but rapidly ramping as new U.S. and European projects come online.

3. 2024 Financial Highlights

Net Result

• Net Income: $21.1 million (includes $53.5 million gain on asset sales and discontinued operations).
• Continuing Operations Loss: $(24.8) million.
• Total Revenue: $10.1 million vs. $30.5 million in 2023 (67% drop, after European asset sales).

Cash Flow & Liquidity

• Operating Activities: $(3.2) million used in 2024, driven by seed-stage project costs, pre-commercial sales and corporate expenses.
• Investing Activities: $(1.7) million used to fund U.S. development and final payments on Lightwave parks.
• Financing Activities: Net cash inflow $1.2 million after convertible note placements and debt repayments.
• December 31, 2024 Cash Balance: $0.2 million vs. $24.6 million at prior year end (largely due to Solis sale proceeds in 2023).

Balance Sheet

• Total Assets: $7.7 million vs. $185 million in 2023 (asset sales & deconsolidations).
• Total Liabilities: $41.6 million vs. $249 million in 2023 (debt reductions from asset disposals).
• Shareholders’ Deficit: $(33.9) million vs. $(63.3) million in 2023.

Debt & Equity

• Convertible & Promissory Notes: $30.3 million outstanding at year-end, net of discounts and fair value adjustments.
• Nasdaq Delisting: Received delisting notice in February 2025 for market-value non-compliance. Now trades OTCQB under ALCE.

4. Key Risks and Uncertainties

Going Concern

• Significant losses and negative cash flows raise doubt about the Company’s ability to continue as a going concern for 12 months without additional financing.
• Management is in talks with banks, funds, and equity partners to secure corporate and project-level capital.

Market & Execution Risks

• Interconnection Delays: U.S. grid bottlenecks could slow new solar park operations.
• Project Delays & Cost Overruns: Permitting, EPC and supply-chain constraints can cause budget shocks.
• FiT & PPA Reforms: Changes in tariffs, incentives, or net-metering rules could erode revenue stability.
• Competitive Landscape: Intense bidding for operational assets, and established utility players entering renewables.

Financial Risks

• Interest Rates: Mix of fixed and floating debt up to 30% triggers sensitivity to rate hikes.
• Foreign Exchange: Euro, Polish zloty, Romanian leu exposures on cash flows and translations.
• Nasdaq Delisting: OTC trading can hamper liquidity, raise cost of capital, and limit access to public markets.

Accounting Estimates & Controls

• Valuation of acquisitions: Complex fair-value inputs for purchase price allocations (Level 3 estimates).
• Impairment Testing: Subjective judgments on expected future cash flows for under-performing assets.
• Internal Control Weakness: Material weaknesses identified in financial reporting require remediation.

5. Outlook & Managements Plans

Capital Structure Rebuild

• Reinvest Solis sale proceeds into new projects to replace lost capacity and cash flows.
• Secure non-recourse project financing and U.S. tax equity (ITC) to minimize equity needs.
• Potential convertible debt and equity raises to shore up corporate liquidity.

Portfolio Growth

• Target 100+ MWp of utility-scale solar in U.S. & Europe by 2026.
• Expand microgrid pipeline via Hover JV and by-lateral acquisitions of niche developers.
• Integrate battery storage and other technologies for 24/7 clean power solutions.

Execution Priorities

• Accelerate permitting and grid interconnection on U.S. projects to capture IRA incentives.
• Strengthen local partnerships to lock in project rights at early stages (Right-of-First-Refusal agreements).
• Build robust internal controls and financial reporting processes as a public company.

6. Investment Score & Conclusion

Investment Score: 3.5/10
While Alternus Clean Energy has built a compelling develop-to-own model and executed several profitable asset sales, it faces significant hurdles:

• A dramatic post-merger restructuring, leading to one-off gains and a smaller operating base.
• Recurring net losses, negative cash flows, and shareholders’ deficit raise a critical going-concern flag.
• Nasdaq delisting onto OTCQB reduces liquidity and access to capital markets.
• Execution risks tied to grid interconnection, regulatory changes, and project financing remain elevated.

On the positive side, alignment with U.S. IRA incentives, a streamlined global footprint, and a pivot to microgrids (Hover Energy JV) offer a path to sustainable revenues. However, until it secures project-level tax equity, shore up corporate liquidity, and demonstrate positive cash generation, this remains a high-risk, early-stage play in the competitive clean-energy space.

Net Result of 2024: Alternus reported a net income of $21.1 million, driven by significant gains on the sale of European assets, but a continuing-operations loss of ($24.8 million) and negative cash flows underscore the ongoing funding challenge.

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