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1 Member FINRA, SIPC Mike Niehuser Analyst 1 (503) miken@scarsdale equities.com Alter NRG to Demonstrate its Leadership Position in the Waste to Energy Industry with Commissioning and Commercial Production at Air Product s Tees Valley project in Teesside, United Kingdom, Reiterate Rating Investment Conclusion Headquartered in Calgary, Canada, Alter NRG Corp. (TSX: NRG; OTCQX: ANRGF) is a clean energy company commercializing plasma gasification projects leveraging its plasma torch technology. Alter NRG entered the plasma gasification business through the acquisition of Westinghouse Plasma Corporation in The company is currently a market leader in providing alternative and renewable clean energy solutions through its proprietary plasma gasification technology to meet the growing global challenges of municipal waste disposal and demand for clean fuels, which places them on a strong footing in several end markets including Biomass To Fuels, Energyfrom Waste (EfW) and certain traditional hydrocarbon fuel replacements. The company is a market leader in a growing industry whose innovative technology is at a tipping point for rapid product adoption. Summary Proven plasma gasification technology. The company is the industry leader for plasma torch technology, with its technology enabling five commercial facilities, and over 20 years experience with applications converting waste to energy and hazardous waste destruction. Carrying the Westinghouse brand, this technology is commercially proven, converting a wide range of waste feedstock economically into useful gasses with residual byproducts. Waste to energy market strong and growing. The growth of municipal solid waste (MSW) is gaining acceptance as the most important unaddressed global environmental issue. This problem is expected to swell in the future with increased industrialization, global incomes and urbanization. The company has five projects in construction or commissioning, which demonstrates a significant advantage over potential competition. Strong product pipeline. The company s project pipeline is both diverse and maturing, with projects in a variety of stages around the world. The Tees Valley project in the United Kingdom should demonstrate the scalability of the company s gasification solution, important to the waste disposal industry, government and investors. The company has already commenced fabrication on a second phase at Tees Valley. Valuation. Currently trading at C$2.57, and shares are undervalued at these levels. Applying a 15% discount rate, our forecast of potential cash flows is based on our assessment of the company s pipeline. We are reiterating our price target of C$8.00 level and our Rating. Alter NRG Corp. August 19, 2014 Rating: Price Target: Price: 52 Week Range: Cash (M)*: NRG.TO BUY C$8.00 C$2.57 C$ C$12.9M Debt (M)*: C$ 0.0M Market Cap (M)*: C$71.9M Enterprise Value (M)*: C$59.0M Adj. Shares Out. (M) (1) 28.2M Q Rev: $ 8.1M FY13 Rev: $ 11.6M TTM: $ 20.0M Stock Performance Source: Bloomberg (all items in Canadian dollars) Company Description Alter NRG Corp. provides alternative clean and renewable energy solutions through plasma gasification. It markets and sells plasma gasification technology; and invests in alternative energy projects in North America, South America, the European Union, the Middle East, and Asia Pacific. See Page 12 for analyst certification and important disclosures. Scarsdale Equities does and seeks to do business with companies covered in research reports. Investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.

2 Company Value Proposition and Investment Thesis Alter NRG Corp. (TSX: NRG; OTCQX: ANRGF), on its recent earnings conference call, made the case that through its wholly owned subsidiary Westinghouse Plasma Corporation (WPC), it is the industry leader providing the next generation of waste to energy solutions. Alter NRG acquired the WPC plasma gasification solution from Westinghouse in 2007 and owns 100% of the technology and associated intellectual property. Alter NRG s WPC plasma gasification solution economically and efficiently addresses the global problem of increasing municipal waste, producing valuable gas products and environmentally benign byproducts, significantly improving upon current practices. This may soon be demonstrated on a grand scale with the commissioning and commercial production of the first phase of Air Products & Chemicals Inc. s (NYSE: APD) Tees Valley project in Teesside, United Kingdom. Alter NRG CEO Walter Howard remarked on the call: It is really quite incredible how many folks are watching the first project, Tees Valley, one which is now in its commissioning phase, and we would expect Air Products to bring it on line with their usual expertise. They are in fact the leading gas provider around the world. Alter NRG cites a World Bank study, What a Waste (by Daniel Hoornweg and Perinaz Bhada Tata, March 2012), in which it is noted that The challenges surrounding municipal solid waste are going to be enormous, on a scale, if not greater than, the challenges we are currently facing with climate change. The World Bank study estimates that 3.5 million tonnes of municipal waste were generated daily in This is expected to increase about 69% to approximately 6 million tonnes per day by The growth is due to increasing urbanization, packaging, and increasing incomes, primarily in developed, developing, and island nations. The study did not address the related problem of hazardous, medical and industrial waste disposal. Alter NRG s WPC gasification solution is better suited to address the growing problem of disposing municipal and various form of hazardous waste than competing current practices. Existing options for disposing of municipal and hazardous waste are primarily limited to landfills and incineration. Both of these options are rapidly becoming problematic, as they become more difficult to locate and permit as populations are growing and awareness of environmental and health issues increases. Neither of these options provides a sustainable long term solution. Landfills have immediate containment issues with methane gas emissions, even after what may be available for capture, with longer term issues of seepage into the environment or water sources. Incineration may provide a preferable solution, including lower carbon emissions and producing offsetting power generation from steam turbines. Incineration does not generate temperatures sufficient to prevent formations of dioxins or furans, and fly ash from incineration is deposited in landfills. Incinerators and landfills, a previously acceptable approach of disposal by burning and burying trash, is becoming increasingly obsolete as a best practice for disposing municipal waste for a developing world. Alter NRG s WPC plasma gasification solution answers these challenges in a unique way through the application of plasma torches, which at a high temperature vaporize municipal waste. Valuable gases are released, such as carbon monoxide and hydrogen, that may be converted to marketable syngas. Other remaining elements are diffused and vitrified in a glass like substance, becoming an environmentally friendly insoluble slag, which may be used as road building material. While the plasma torches make possible the vaporizing of waste, it is the expertise of managing the flows of heated vapors within the gasifier (gasification cauldron) that provides the critical advantage. This makes it possible to process a wide variety of waste feedstock while capturing and converting loose elements into syngas or harmless slag. The WPC plasma gasification solution has been demonstrated in pilot plants and commercial facilities 2

3 over several decades, but the increased capacity of the facilities at Tees Valley, including the WPC G65 gasifier, is expected to demonstrate the scalability and robust economics of Alter NRG s destructive technology for converting municipal waste to energy. Tees Valley Project (first phase) in the United Kingdom (note Alter NRG gasifier to right, gas cleaning circuit to the left) Development at Tees Valley: A Destructive Technology Source: Analyst Areas of the world that are most likely to become early adopters of Alter NRG s WPC gasification solution will have a combination of characteristics including high energy costs, diminishing landfill space, and an increasing awareness favoring clean air and water. Air Product s development of a waste gasifier at Teesside in the United Kingdom incorporates all of these characteristics. Landfilling is no longer considered to be a solution in the United Kingdom. The Tees Valley project receives revenues for accepting municipal waste, may sell power into the grid, and also receives government incentives. We attended the Alter NRG Open House at Teesside, United Kingdom, viewed progress at the Tees Valley project, and interacted with company management and presenters. The first phase at Tees Valley, incorporating Alter NRG s WPC G65 gasifier, is expected to process 1,000 tons of partially sorted municipal waste per day and is rated to generate at least 49 MW of power. The economics at Tees Valley are boosted by being paid tipping charges to accept municipal waste, and effectively producing syngas in a combined cycle generation, generating electricity sufficient to power 50,000 households. Air Products is also able to take advantage of valuable Renewable Obligation Certificates (ROCs) available for alternative energy projects. Air Products was sufficiently confident in the WPC gasification solution and its economics to commence construction of a carbon copy second phase at Tees Valley with a combined total cost of about one billion dollars. On Air Products most recent earning conference call, management confirmed that it is on schedule to complete commissioning of the first phase at Tees Valley by the end of 2014, and targets full commercialization in the first quarter of Commissioning the WPC gasifier will come late in the process. (On Alter NRG s recent conference call, Alter NRG reported completing training for forty Air Products personnel in the proper application of the technology.) Given the size of the investment, the high profile of a company such as Air Products, and the importance of successful commissioning to the waste disposal and utility industry, full commercial production of the first phase at Tees Valley is a significant event to the waste disposal industry and public utilities. On its recent earnings conference call, the newly appointed Air Products CEO Seifi Ghasemi, reported to the investment community that by mid September he would provide visibility on the strategic direction for expectations for capital 3

4 expenditures and required return on investments. This would be followed by a review of progress implementing its strategy early in 2015, coincidentally, close to when the first phase at Tees Valley is scheduled to attain commercial operation. The second phase at Tees Valley is anticipated to come on line in 2016, and Alter NRG anticipates annual sales of G 65 WPC gasifiers to follow. While it is natural that Air Products, and in some manner Foster Wheeler, the project s EPC (Engineering Procurement & Construction) provider, to expand upon Tees Valley, a number of developing complimentary opportunities may prove to be a more significant and immediate financial benefit to Alter NRG. Tees Valley Projects in the United Kingdom (December 2013) Complimentary Opportunities in the Near Term Source: Air Products The size and scalability of the G 65 WPC gasifier is important to demonstrate the efficacy of Alter NRG s solution as a destructive technology in the global waste industry. Financial success for Alter NRG will be achieved with the sale of increasing numbers of gasifier units, parts and equipment, engineering contracts, licenses and may eventually include the opportunity to take passive investment interests in utility scale projects. The flexibility of the technology, converting diverse waste feedstock into marketable gasses and materials, is predictably and rapidly evolving into a variety of novel applications. The adoption of Alter NRG s technology will be determined by its ability to collaborate and harmonize with complimentary opportunities. For example, Alter NRG noted on its recent earnings conference call that they are advancing commercial relationships with a leading turbine manufacturer which is compatible with their large fleet of over 5,000 gas turbines. It is expected that the syngas produced in the WPC gasifier, when combined with liquid natural gas (LNG), has the potential to significantly improve the performance and economics of gas turbines. Alter NRG may benefit from a shorter sales and permitting cycle, working through the leading turbine manufacturer to its large established customer base. Alter NRG management has indicated that there may be more definitive information on this opportunity to be announced at the Gasification Technologies Council conference in Washington, DC in late October,

5 A Major Opportunity in Southeast Asia China represents the most natural and largest opportunity for application of Alter NRG s WPC gasifier technology. The elements of increasing urbanization, packaging and income cited in the World Bank study are all present in China. This rapidly developing nation is also becoming increasingly frustrated with the environmental issues of air and water quality. In addition, the growth of the economy in China is challenged by inadequate domestic access to inexpensive and clean sources of energy. Alter NRG is well positioned to provide its technology as a solution to these issues. On Alter NRG s recent earnings conference call, CEO Walter Howard discussed working in China to be named in China s next Five year plan: It s not just a suggestion, the way it is in so many Western countries, when the governments put a plan out, they actually do exactly what s in the plan. So this would be the 13th version of a Five year plan, for Chinese infrastructure going forward, and we re very excited that we have the potential to be named, gasification as not only as an energy solution to wean themselves from coal and imported LNG and oil, but also to resolve some of the legendary pollution problems that China is experiencing in air pollution as well. So we are working closely with the NDRC, which used to be known as the Central Planning Committee, to explore whether we can be named as a specific solution and we are very excited of the potential. Alter NRG has been working with several companies in China. Each company is working to resolve a specific waste disposal issue or produce unique products or energy products. GTS Energy Technology (Shanghai) Ltd. (GTS) with Alter NRG has developed a complete turnkey waste destruction unit capitalizing the partner s strengths, which may soon be marketed globally. GreenWorld Energy Solutions Corp. (GES) in Bijie has focused on the opportunity of producing useful building products from the vitrified slag. Wuhan Kaidi (Kaidi) is using Alter NRG WPC solutions to convert biomass into syngas and liquid fuels. Each of these initiatives contributes to accomplishing China s goals of effectively improving the environment and energy independence. Shanghai, China: GTS Energy Technology (Shanghai) Ltd. (GTS) The high temperature created by the plasma torches (comfortably over 1,500 C) in Alter NRG s WPC plasma gasification units vaporizes all organic materials. This clearly provides the most obvious option for the disposal of all forms of waste. Materials are diffused and cooled to become an insoluble glass like slag in near perfect condition for disposal or reuse (as commercial road building material or other products). Waste disposal fees for hazardous, medical, and industrial (fly ash for example) are significantly higher than municipal waste, which drive the economics (opposed to Tees Valley with combined cycle power which generates electricity) of the GTS waste destruction units. The waste destruction units will operate on a much smaller scale than Tees Valley and likely utilize Alter NRG s smaller P 5 WPC gasification solution. These waste destruction units may be viewed as superior to incineration, as they eliminate dioxins and other residue such as fly ash which would otherwise be deposited in a landfill. GTS completed the commissioning of their demonstration facility in Shanghai in February of 2014, and reported at the Open House that it had met specifications. Presently, GTS plans to complete tests in August on eleven other types of waste. GTS has signed a joint development and marketing agreement with Alter NRG. The agreement joins the strength of Alter NRG s technology with low cost steel fabrication in China, as well as marketing within China and globally. The total installed capital cost of these turn key units are expected to cost as little as USD$20 million and are expected to be complimentary to over 2,000 existing incinerators worldwide. Alter NRG management noted on the previous earning 5

6 conference call that it is actively touring customers at the reference facility in Shanghai. The Shanghai demonstration facility may showcase Alter NRG s technologies to support inclusion in China s Five year plan. GTS Energy Technology Shanghai Ltd. Waste Demonstration Plant (Alter NRG gasifier on the left, gas cleaning circuit to the right) Bijie, China: GreenWorld Energy Solutions Corp. (GES) Source: GTS Energy Technology (Shanghai) Ltd. GreenWorld Energy Solutions Corp. (GES) has taken an innovative approach to Alter NRG s WPC gasification solution ability to reduce non gas material to an insoluble glass like material. Taking it a step further than using the slag for road building material, GES has developed a process to create foam which may be used as insulation in constructing buildings. The foam is strong, fireproof and lightweight and rated as a Class A building material in China. This product has value for its strength and durability in an area prone to earthquakes, and also supports national goals of energy conservation. In GES situation, the economics are not driven primarily by revenues from tipping charges or sale of electricity into the electric grid, but through low costs of construction and operation, and potentially selling an innovative building product into a very large market. GreenWorld Energy Solutions Foam Insulation Product (approximately one quarter ounce of foam produced from vitrified slag) Source: Analyst 6

7 GES facility at Bijie in Guizhou, China, is scheduled in two phases, which will each include Alter NRG G 65 WPC gasifiers. Alter NRG announced the sale of the first gasifier in February of 2014 in the amount of US$15 million. The project is waiting on final government environmental approvals that are expected soon, and Alter NRG anticipates a purchase order and commencing fabrication by the end of the third quarter. At the Open House in Teesside, a GES representative indicated the potential for China to build 300 MSW incinerators over the next ten years, and notes the large opportunity should they penetrate 20% of that market. Presently, the provincial government in Guizhou has recommended eight projects, and there is additional potential in other provinces. Wuhan, China: Wuhan Kaidi Holding Investment Co., Ltd (Kaidi) The Alter NRG WPC gasification solution vaporizes waste material that liberates gases that may be converted into syngas, which may be further converted into liquid fuels (diesel). Kaidi constructed and commissioned a 100 tpd demonstration facility in 2013 to convert biomass into liquid fuels. Kaidi recently acquired the Rentech liquids conversion technology to advance the challenging step on converting syngas into liquid fuels on a much larger scale. The goal of using Fischer Tropsch like processes to convert coal or biomass into liquid fuels has been a goal of energy dependent nations such as South Africa and Germany, and with the demands brought forth by rapid economic development, China as well. Financial Discussion Alter NRG reported C$8.1 million in revenues in the second quarter of its 2014 fiscal year; this was up 86% over $4.3 million the same quarter of the previous year, and well above our estimate of C$5.8 million. This was primarily from equipment sales of C$7.4 million associated with fabrication for the second phase at Tees Valley, which was reported to be 65% complete at the end of the quarter. Other revenue included C$218,402 for engineering and testing services and C$486,331 for parts and other services. Alter NRG realized gross profit of C$1.6 million in the second quarter, or 20% of revenues, up from 12% in both the previous quarters and the same quarter a year earlier, but below our estimate of 27%. Operating expenses were C$2.5 million, meeting our forecast, which consisted of C$1.6 million of G&A and C$942,948 for selling and distribution. This resulted in an operating loss in the second quarter of 2014 of C$922,032 prior to depreciation, which was slightly better than our forecast of an operating loss of C$953,750. (Alter NRG management noted $C3.0 million in depreciation expense, which included a one time expense for writing down equipment at its Madison, Pennsylvania demonstration facility.) Despite weaker than forecast gross margins, the increase in gross revenues more than offset operating expenses, meeting our forecast and demonstrating improvement over previous financial reporting periods. The company reported current assets of C$17.8 million as of the end of its second quarter of fiscal 2014, which included C$12.9 million in cash and cash equivalents and C$471,148 in restricted cash. Current liabilities were $7.7 million, including about C$1.5 million in deferred revenue, which resulted in positive unadjusted working capital of C$10.0 million. Management Guidance Alter NRG management expects to complete the remaining 45% of the $21 million contract on the second phase of Tees Valley by the end of They expect to complete a purchase order on the $15 million sale to GES for their facility in Bijie, China, late in the third quarter and commence fabrication on work which will extend into We would expect completion of a purchase order to include completing a license agreement. Also, management anticipates additional sales of torches to Beijing Huanyu GuanChuan Plasma Technology Ltd., used for industrial furnace application at its 7

8 demonstration facility. In addition, they expect to commence engineering on Cahill Energy s plans to construct a 600 tpd municipal waste gasification facility in Barbados. Waste2Tricity is also scheduled to pay the remaining $1 million due on their exclusive license in the Thailand market. Management also noted on the recent earning conference call the potential for other sales to be announced in 2014, but cautioned that given the nature of smaller numbers or large transactions, revenues may be lumpy. They added that in three to five years they would hope to have seven G 65 scale projects annually. Management provided long term guidance for gross margins of 35% to 40%, which it expects to achieve on a go forward basis. This is significantly higher than what was achieved on the sale to Air Products on the Tees Valley, which appears reasonable in the scope and importance of the project. The higher guidance may reflect later transactions and pricing power earned through commercial production at Tees Valley. Management appears comfortable with operating expenses at about C$10 million per year, though noting that expenses were slightly higher in the quarter due to marketing activities, they hoped to be cash flow positive in the second half of Management also appeared confident on the liquidity of its balance sheet on the recent earnings conference call, with respect to its sales pipeline. Alter NRG management was pleased with an expanding and maturing sales pipeline. They noted a gross pipeline of $4 billion, or to $1.3 billion if refined to include only more advanced and active opportunities. This would appear to us to translate to a market opportunity of $4 billion with a cumulative target penetration of $1.3 billion. Considering earlier guidance from the company of $30 million in 2014, Alter NRG may experience strong growth upon execution. Our Model We have forecast a solid finish to fiscal 2014, with revenues of about C$33 million and breaking even. This would include completing the contract on the second phase at Tees Valley and commencing fabrication for GES. This would also include expected license fees and various engineering and parts and other sales. We have retained in our model a significant increase in gross margin, which matches management guidance. This also includes management guidance for G&A and marketing, which appears reasonable. We are less confident in being able to identify the specific contracts to support our previous revenue forecast for We had anticipated the potential for purchase orders for a third WPC G 65 unit to Air Products or accelerated development with Cahill Energy in Barbados. Since constructing our model, we have increased confidence in two phases of construction with GES in Bijie, China, and the potential for unanticipated sales through GTS, or what could come from integration with leading turbine manufacturer. Much of this may become apparent over the balance of 2014, but many of these initiatives may not occur as quickly as investors may expect. Conclusion We remain confident of our investment thesis for Alter NRG. Clearly, if burning and burying waste is the only option available to dispose of waste material, it only makes sense to do it in a manner that recovers unrealized potential with no useful resources wasted, and what remains to be repurposed in a manner that may be reused or returned to the environment. Alter NRG s WPC plasma gasification solution appears to have captured this ideal with its ability to process a wide variety of waste feedstock, destined for the incinerator or landfill, with the ability to produce marketable gases, potentially convertible into electricity or liquid fuels, with no minor environmental impacts. 8

9 It is a challenge to develop a financial model for an innovative technology for an undeveloped market. Alter NRG management referred to engineering revenues at best as being a barometer of future conditions, rather than a precise indicator of the timing of future business. While Alter NRG management is convinced that the technology has passed a tipping point and may experience rapid adoption, they warn that revenues will continue to be lumpy. We consider time to remain an issue in the minds of investors, which will cause many to remain on the sidelines until the company reaches a period of sustained growth and momentum. Given the potential catalysts, including commercialization of Tees Valley and its importance to the waste industry and utilities, opportunities in China, or the potential announcements with a leading turbine manufacturer, we anticipate that Alter NRG s stock price may appreciate ahead of announcements of sales or financial results. Our model attempted to qualify financial results within a range of earlier company guidance. We concluded revenues in 2014 toward the lower end of company guidance, with revenues in 2015 closer to the higher end of the range. We anticipated expanding margins, which allowed us to discount potential cash flows to a $225 million present value, which is roughly C$8.00 per share. While we relied on this for our target price, it was more than sufficient to qualify for us assigning a rating. We reiterate our rating and an US$8.00 target price. Paul Troiano and Analyst (Tees Valley Project in background to right) Source: Analyst 9

10 Alter NRG Corp. Balance Sheet (in Canadian Dollars) FYE 2011 A FYE 2012 A FYE 2013 A 1Q14 A 2Q14 A Assets Current assets: Cash and cash equivalents $ 3,379,965 $ 7,022,991 $ 7,628,798 $ 11,977,064 $ 12,921,602 Restricted cash 1,443, , , , ,148 Accounts receivable 2,438, ,624 1,895,283 6,677,685 2,328,472 Prepaid expenses 270, , , , ,292 Inventories 503, , , , ,654 Contract work in process 862, ,522 69,884 Assets held for sale 1,300,000 1,500, ,000 Discontinued operations $ 2,205,227 10,241,212 $ 9,360,926 $ 12,943,205 $ 22,233,596 $ 17,756,052 Non current assets: Property, plant and equipment 3,810,311 3,412,022 3,453,325 3,495,125 1,142,207 Intangible assets 42,412,849 39,962,587 40,547,625 41,457,364 39,608,182 Investment in associate 4,581,030 Other long term assets 1,652, ,000 Discontinued operations 5,056,889 Total Assets $ 63,173,939 $ 57,566,565 $ 56,944,155 $ 67,186,085 $ 58,506,441 Liabilities and Shareholder Equity Current liabilities: Accounts payable and accrued liabilities $ 1,922,921 $ 6,032,125 $ 4,739,809 $ 5,327,762 $ 6,156,259 Deferred revenue 1,093,367 2,452, ,619 5,162,845 1,450,784 Operating lease obligations 207, ,153 Current liabilities of discontinued operations $ 890,106 4,113,980 $ 8,485,088 $ 5,262,428 $ 10,490,607 $ 7,723,196 Non current liabilities: Deferred income tax 15,255,176 14,333,609 14,692,567 15,107,459 14,423,122 Operating lease provision 257, ,964 Warranty provision 612,000 1,144,327 1,410,782 1,743,526 Non current discontinued operations 681,701 Total liabilities $ 20,050,857 $ 23,430,697 $ 21,099,322 $ 27,266,504 $ 24,119,808 Shareholder equity: Shareholder capital 127,375, ,203, ,311, ,335, ,454,924 Contributed surplus 327, , , ,765 Reserves 7,685,923 7,650,033 9,185,757 9,989,621 9,352,309 Deficit (91,938,688) (103,045,714) (113,980,488) (115,732,948) (120,748,365) Total shareholder equity $ 43,123,082 $ 34,135,868 $ 35,844,833 $ 39,919,581 $ 34,386,633 Total shareholder equity and liabilities $ 63,173,939 $ 57,566,565 $ 56,944,155 $ 67,186,085 $ 58,506,441 10

11 Alter NRG Corp. Income Statement Company actuals, Scarsdale estimates FYE 2010 A FYE 2011 A FYE 2012 A 1Q13 A 2Q13 A 3Q13 A 4Q13 A FYE 2013 A 1Q14 A 2Q14 A 3Q14 E 4Q14 E FY2014 E FY2015 E Revenues Equipment sales $ 1,569,234 $ 2,077,966 $ 12,553,722 $ 3,855,232 $ 4,134,749 $ 1,551,415 $ 2,038,974 $ 11,580,370 $ 5,906,247 $ 7,391,458 $ 5,200,000 $ 10,700,000 $ 29,197,705 $ 84,500,000 Engineering and testing services 4,435,911 4,057, , , , , ,515 1,402, , , , ,000 1,390,961 1,200,000 Licensing fees 250, ,769 50, ,000 1,000,000 1,000,000 1,000,000 2,000,000 1,000,000 Parts and other sales 407, , , ,374 53, ,242 18, , , , , , ,226 4,400,000 Total revenues $ 6,412,736 $ 6,711,189 $ 13,699,743 $ 4,365,811 $ 4,343,618 $ 2,527,704 $ 3,199,262 $ 14,436,395 $ 6,187,701 $ 8,096,191 $ 6,800,000 $ 12,300,000 $ 33,383,892 $ 91,100,000 Cost of sales Equipment sales 812,921 1,074,972 11,420,242 3,435,726 3,730, ,438 2,930,115 10,761,322 5,243,596 6,118,321 3,900,000 7,490,000 22,751,917 59,150,000 Engineering and testing services 1,791,748 1,433, , ,298 70, ,421 37, , , , , , , ,000 Licensing fees 30, (522) Parts and other sales 86, , , ,709 36, , ,134 90, ,597 60,000 60, ,005 2,200,000 Total cost of sales $ 2,690,791 $ 2,673,345 $ 12,033,196 $ 3,676,255 $ 3,837,021 $ 988,367 $ 2,966,978 $ 11,468,621 $ 5,451,567 $ 6,493,007 $ 4,210,000 $ 7,800,000 $ 23,954,574 61,950,000 Gross profit $ 3,721,945 $ 4,037,844 $ 1,666,547 $ 689,556 $ 506,597 $ 1,539,337 $ 232,284 $ 2,967,774 $ 736,134 $ 1,603,184 $ 2,590,000 $ 4,500,000 $ 9,429,318 29,150,000 G&A 10,014,211 7,507,820 6,606,381 1,555,289 1,671,630 1,652,487 1,675,642 6,555,048 1,472,330 1,582,269 Selling and distribution 1,681,220 1,364,085 1,749, , , , ,843 2,761, , ,948 G&A, selling & distribution $ 11,695,431 $ 8,871,905 $ 8,356,303 $ 2,196,136 $ 2,330,076 $ 2,402,701 $ 2,387,485 $ 9,316,398 $ 5,451,567 $ 2,525,217 $ 2,500,000 $ 2,500,000 $ 9,943,963 $ 10,000,000 EBITDA $ (7,973,486) $ (4,834,061) $ (6,689,756) $ (1,506,580) $ (1,823,479) $ (863,364) $ (2,155,201) $ (6,348,624) $ (4,715,433) $ (922,033) $ 90,000 $ 2,000,000 $ (514,645) $ 19,150,000 Share based payments 1,222, , , , , ,140 72, , , ,489 Depreciation and amortization 2,391,175 2,454,797 2,350, , , , ,013 2,394, ,472 3,043,014 Foreign exchange gain (loss) (587,318) 114,554 (250,671) 334, ,071 (268,932) 520, , ,497 (295,402) Other income 269,025 1,634, ,303 (48,850) 23 97,489 48, Share of loss from associate 418,970 1,266, ,834 1,906,264 Net loss on revaluation of assets held for sale 1,374,766 Finance income (costs), net 184,038 (458,204) (19,879) (29,141) 13,149 10,555 63,342 57,905 9,424 Loss before tax from continuing operations $ 11,721,430 $ 7,053,666 $ 11,299,369 $ (1,908,732) $ (2,796,662) $ (4,603,643) $ 20,854,632 $ 11,545,595 $ 1,916,048 $ 5,118,296 Loss from continuing operations $ 13,239,329 $ 4,123,382 $ 10,711,029 $ (1,759,229) $ (2,644,906) $ (4,449,633) $ 19,788,542 $ 10,934,774 $ 1,752,460 $ 5,015,418 Loss from discontinued operations $ 9,112,984 $ 17,023,037 $ 668,651 Gain on dispostion of discontinued opertions 272,654 Total comprehensive loss (23,244,229) (20,748,825) (11,514,568) (1,458,964) (2,158,087) (4,735,280) (1,661,391) (10,013,722) 1,236,994 5,742,293 (Loss) gain per share basic and diluted Continued operations $ (0.84) $ (0.28) $ (0.64) $ (0.08) $ (0.08) $ (0.16) $ (0.12) $ (0.44) $ (0.04) $ (0.21) $ (0.00) $

12 Disclosure Appendix AUTHOR CERTIFICATION Mike Niehuser, the author primarily responsible for this report certifies, with respect to each security or issuer in this report, that: (1) all of the views expressed in this report accurately reflect his own personal views about the subject companies and their securities; (2) part of the author s compensation may be, directly or indirectly, related to a portion of the commissions generated by Scarsdale Equities LLC [ SE ] in transactions in this or other securities designated for the author s credit; (3) the author does not receive compensation based on investment banking or advisory services SE might provide to this or any other issuer. IMPORTANT U.S. REGULATORY DISCLOSURES Fundamental Analysis. The research provided in this report is based on fundamental analysis. The investments discussed in this report in some cases will not be suitable for all investors. Investors should use this report as only one input in formulating an investment opinion. Additional inputs should include, but are not limited to, the review of other research generated by a review of regulatory filings, other available news items, and other analyses that may influence the merits of the securities of the issuers discussed. RATING DISTRUBUTION Covered companies from which Scarsdale Equities LLC has received investment banking compensation within the previous twelve months or from which it expects to receive compensation within three months: Scarsdale Equities LLC Fundamental Analysis Coverage Universe (as of 7/9/13) Count Percent Investment Banking Relationships Count Percent 2 100% 1 100% Neutral 0 0% Neutral 0 0% Sell 0 0% Sell 0 0% : Expected to outperform broad market averages by at least 15%. Neutral: Expected to perform in line with broad market averages. Sell: Expected to underperform broad market averages by at least 15%. COMPANY SPECIFIC DISCLOSURES All applicable current disclosures on the items referred to in this report are obtainable by contacting Mike Niehuser at (503) The following disclosures apply to the securities discussed in this research report: 1 Scarsdale Equities LLC, at the time of publication, does not make a market in any security. 2 The author has a financial interest in any security covered in this report. 3 Part of the author s compensation may consist of a portion of the commissions generated by transactions in this issuer s securities placed at Scarsdale Equities LLC for the credit of the author. 4 Scarsdale Equities LLC may seek or receive advisory or investment banking compensation from the issuer in the next ninety days. PRICE TARGET METHODOLOGY AND RISKS The following table includes a present value analysis of Alter NRG s cash flow based on the company s guidance adjusted for an assessment of the current pipeline. This includes revenues in 2014 at the lower end of company guidance and cash flow near break even. Revenues are forecast in 2015 slightly above guidance offered, and cash flow slightly below, 12

13 Alter NRG s upper range of guidance. Accepting Alter NRG s guidance for cash flow for 2016, including stabilized cash flow in 2017 and beyond, and discounting the values, equates to a present value of $225 million, or $8.00 per share. While timing of orders is problematic, the next 18 months are difficult to forecast, and the pipeline in 2016 and beyond is even more uncertain. The discount rate applied is at a generally accepted level for speculative forecasting. Alter NRG Guidance # Projects 1 to 2 3 to 5 7 to plus Revenue $30 to $60M $70 to $90M $100 to $130M $200M Cash Flow $5 to $10M $10 to $20M $20 to $30M $50M plus Analyst Opinion Revenue $33M $91M $130M $200M Cash Flow $0.2M $19M $30M $50M plus $225 O/S shares(m) PV/shares $7.98 The financial model provides a guide for interpreting announcements and financial reporting. The factors with the greatest impact on the model include the timing of purchase orders and margins. Margins will also be a critical driver for future cash flows. While improving margins should naturally occur with the optimization of new processes for new technology, successful commissioning of Tees Valley or GES s demonstration plant in Shanghai may be expected to produce pricing power, which will expand according to the rate of product adoption. The model also suggests that the current price of the Alter NRG s stock is less than one half of the discounted value of contracted and potential business, including the company s long term forecast beyond The Company operates in highly competitive markets and may be unable to successfully compete against competitors having significantly greater resources and experience. Future technology changes may render obsolete various elements of equipment comprising plasma gasification installations. AlterNRG must select equipment for its projects so as to achieve attractive operating efficiencies, while avoiding excessive downtimes from the failure of unproven technologies. If it is unable to achieve a proper balance between the cost, efficiency and reliability of equipment selected for its projects, its growth and profitability will be adversely impacted. AlterNRG may need to raise additional capital for its business, which would potentially dilute existing stockholders. OTHER DISCLAIMERS This report is not directed to, nor intended for use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject SE or 13

14 its subsidiaries or its affiliates to any registration or licensing requirement within such jurisdiction. None of the material, nor its content, nor any copying of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of SE. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of SE. The information, tools and material presented in this report are provided for informational purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. SE in some cases will not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. SE will not treat recipients as its customers by virtue of their receiving the report. 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Write to Mike Niehuser at Scarsdale Equities LLC, 10 Rockefeller Plaza, Suite 720, New York, NY to obtain additional information or him at miken@scarsdale equities.com SCARSDALE EQUITIES LLC Mike Niehuser, Analyst Scarsdale Equities LLC 10 Rockefeller Plaza Suite 720 New York, NY Work: (503) Cell: (503) Fax: (212) miken@scarsdale equities.com None of the information contained in this report constitutes a recommendation, solicitation or offer by Scarsdale Equities LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. The information contained in this report has been prepared without reference to any particular investor's investment requirements or financial situation. Certain transactions give rise to substantial risk and are not suitable for all investors. 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