| Green Bonds, Convertible and Non-convertible Promissory Notes | 13. Green Bonds, Convertible and Non-convertible Promissory Notes The following table reflects
the total debt balances of the Company as June 30, 2024 and December 31, 2023 (in thousands):
As of As of
2024 2023
(in thousands)
Senior Secured Green Bonds $ 86,618 $ 166,122
Senior Secured debt and promissory notes secured 33,538 32,312
Total debt 120,156 198,434
Less current maturities (120,156 ) (198,434 )
Long term debt, net of current maturities $ - $ -
Current Maturities $ 120,156 $ 198,434
Less unamortized debt discount (614 ) (892 )
Current Maturities net of debt discount $ 119,542 $ 197,542 The Company incurred debt
issuance costs of $0.6 million during the six-month period ended June 30, 2024. Debt issuance costs are recorded as a debt discount and
are amortized to interest expense over the life of the debt, upon the close of the related debt transaction, in the Consolidated Balance
Sheet. Interest expense stemming from amortization of debt discounts for continuing operations for the six months ended June 30, 2024
was $1.3 million and for the year ended December 31, 2023 was $4.9 million. There was no interest expense
stemming from amortization of debt discounts for discontinued operations for the six months ended June 30, 2024 and 2023, respectively. All outstanding debt for the
company is considered short-term based on their respective maturity dates and are to be repaid within the year 2024. Senior secured debt: In May 2022, AEG MH02 entered
into a loan agreement with a group of private lenders of approximately $10.8 million with an initial stated interest rate of 8% and a
maturity date of May 31, 2023. In February 2023, the loan agreement was amended stating a new interest rate of 16% retroactive to the
date of the first draw in June 2022. In May 2023, the loan was extended and the interest rate was revised to 18% from June 1, 2023. In
July 2023, the loan agreement was further extended to October 31, 2023. In November 2023, the loan agreement was further extended to May
31, 2024. As of the date of this report this loan is in default, however management is in active discussions with the lender to renegotiate
the terms. Due to these addendums, $1.6 million of interest was recognized in the six months ended June 30, 2024. The Company had principal
outstanding of $10.7 million and $11.0 million as of June 30, 2024 and December 31, 2023, respectively. In June 2022, Alt US 02, a
subsidiary of Alternus Energy Americas, and indirect wholly owned subsidiary of the Company, entered into an agreement as part of the
transaction with Lightwave Renewables, LLC to acquire rights to develop a solar park in Tennessee. The Company entered into a construction
promissory note of $5.9 million with a variable interest rate of prime plus 2.5% and an original maturity date of June 29, 2023. On January
26, 2024, the loan was extended to June 29, 2024 due to logistical issues that caused construction delays. As of the date of this report
this loan is currently in default. Management is in active discussions with the lender to renegotiate the terms. The Company had principal
outstanding of $5.4 million and $4.3 million as of June 30, 2024 and December 31, 2023, respectively. On February 28, 2023, Alt
US 03, a subsidiary of Alternus Energy Americas, and indirect wholly owned subsidiary of the Company, entered into an agreement as part
of the transaction to acquire rights to develop a solar park in Tennessee. Alt US 03 entered into a construction promissory note of $920
thousand with a variable interest rate of prime plus 2.5% and due May 31, 2024. This note had a principal outstanding balance of $717
thousand as of June 30, 2024 and December 31, 2023, respectively. On July 2, 2024, management renegotiated the terms with the lender to
a revised interest rate of 11% and to extend the maturity date to November 30, 2024. In July 2023, one of the Company’s
US subsidiaries acquired a 32 MWp solar PV project in Tennessee for $2.4 million financed through a bank loan having a six-month term,
24% APY, and an extended maturity date of February 29, 2024. The project is expected to start operating in Q1 2026. 100% of offtake is
already secured by 30-year power purchase agreements with two regional utilities. The Company had a principal outstanding balance of $7.0
million as of June 30, 2024 and December 31, 2023, respectively. On July 3, 2024, management renegotiated the terms with the lender to
extend the maturity date to October 1, 2024. In July 2023, Alt Spain Holdco,
one of the Company’s Spanish subsidiaries acquired the project rights for a 32 MWp portfolio of Solar PV projects in Valencia, Spain,
with an initial payment of $1.9 million, financed through a €3.0 million ($3.3 million) bank facility having a six-month term and
accruing ’Six Month Euribor’ plus 2% margin. On January 24, 2024, the maturity date was extended to July 28, 2024. On July
28, 2024 the loan was further extended to January 28 , In October 2023, Alternus
Energy Americas, one of the Company’s US subsidiaries secured a working capital loan in the amount of $3.2 million with a 0% interest
until a specified date and a maturity date of March 31, 2024. In February 2024, the loan was further extended to February 28, 2025 and
the principal amount was increased to $3.6 million. In March 2024, the Company began accruing interest at a rate of 10%. Additionally,
on February 5, 2024 the Company issued the noteholder warrants to purchase up to 90,000 shares of restricted common stock, exercisable
at $0.01 per share having a 5 year term and fair value of $86 thousand. The Company had a principal outstanding balance of $1.8 million
as of June 30, 2024 and $3.2 million as of December 31, 2023. As of the date of this report this loan is currently in default. Management
is in active discussions with the lender to further extend the note. In December 2023, Alt US 07,
one of the Company’s US subsidiaries acquired the project rights to a 14 MWp solar PV project in Alabama for $1.1 million financed
through a bank loan having a six-month term, 24% APY, and a maturity date of May 28, 2024. The project is expected to start operating
in Q2 2025. 100% of offtake is already secured by 30-year power purchase agreements with two regional utilities. This note had a principal
outstanding balance of $1.1 million as of June 30, 2024 and December 31, 2023, respectively. On July 3, 2024, management renegotiated
the terms with the lender to extend the maturity date to October 1, 2024. For the year ended December
31, 2023, 225,000 shares of Common Stock were issued at Closing to the Sponsor of Clean Earth to settle CLIN promissory notes of $1.6
million. The note has a 0% interest rate until perpetuity. The shares were issued at the closing price of $5 per share for $1.1 million.
The difference of $0.5 million was recognized as an addition to Additional Paid in Capital. The Company had a principal outstanding balance
of $1.4 million as of June 30, 2024 and $1.6 million as of December 31, 2023. Management determined the extinguishment of this note is
the result of a Troubled Debt Restructuring. Convertible Promissory Notes: In January 2024, the Company
assumed a $938 thousand (€850 thousand) convertible promissory note from AEG PLC, a related party. The note had a 10% interest maturing
in March 2025. The note was assumed as part of the Business Combination that was completed in December 2023. On January 3, 2024, the noteholder
converted all of the principal and accrued interest owed under the note, equal to $1.0 million, into 1,320,000 shares of restricted common
stock. In April 2024, the Company
issued to an institutional investor a senior convertible note in the principal amount of $2,160,000, issued with an 8.0% original issue
discount, and a warrant to purchase up to 2,411,088 shares of the Company’s common stock at an exercise price of $0.480 per share.
Maxim Group LLC (“Maxim”) acted as placement agent for the Convertible Note issuance and also received a warrant to purchase
241,109 shares of common stock with an exercise price of $0.527 per share for their role as placement agent. The Company also paid Maxim
a cash placement agency fee of $140,000, and reimbursed certain out of pocket fees up to $50,000. The Company received gross proceeds
of $2,000,000, before fees and other expenses associated with the transaction. The Convertible Note matures on April 20, 2025 (unless
accelerated due to an event of default or accelerated up to six installments by the Investor), bears interest at a rate of 7% per annum,
which shall automatically be increased to 12.0% per annum in the event of default, and ranks senior to the Company’s existing and
future unsecured indebtedness. The Convertible Note is convertible in whole or in part at the option of the Investor into shares of Common
Stock (the “Conversion Shares”) at the Conversion Price (as defined below) at any time following the date of issuance of the
Convertible Note. The Convertible Note is payable monthly on each Installment Date (as defined in the Convertible Note) commencing on
the earlier of July 18, 2024 and the effective date of the initial registration statement required to be filed pursuant to the Registration
Rights Agreement (as defined below) in an amount equal the sum of (A) the lesser of (x) $216,000 and (y) the outstanding principal amount
of the Convertible Note, (B) interest due and payable under the Convertible Note and (C) other amounts specified in the Convertible Note
(such sum being the “Installment Amount”); provided, however, if on any Installment Date, no failure to meet the Equity Conditions
(as defined in the Convertible Note) exits pursuant to the Convertible Note, the Company may pay all or a portion of the Installment Amount
with shares of its common stock. The portion of the Installment Amount paid with common stock shall be based on the Installment Conversion
Price. “Installment Conversion Price” means the lower of (i) the Conversion Price (defined below) and (ii) the greater of
(x) 92% of the average of the two (2) lowest daily VWAPs (as defined in the Convertible Note) in the ten (10) trading days immediately
prior to each conversion date and (y) $0.07. “Equity Conditions Failure” means that on any day during the period commencing
twenty (20) trading days prior to the applicable Installment Notice Date or Interest Date (each as defined in the Convertible Note) through
the later of the applicable Installment Date or Interest Date and the date on which the applicable shares of Common Stock are actually
delivered to the Holder, the Equity Conditions have not been satisfied (or waived in writing by the Holder). The Convertible Note is convertible,
at the option of the Investor, at any time, into such number of shares of Common Stock of the Company equal to the principal amount of
the Convertible Note plus all accrued and unpaid interest at a conversion price equal to $0.48 (the “Conversion Price”). The
Conversion Price is subject to full ratchet antidilution protection, subject to a floor conversion price of $0.07 per share. The Convertible
Note may not be converted and shares of Common Stock may not be issued under the Convertible Note if, after giving effect to the conversion
or issuance, the Investor together with its affiliates would beneficially own in excess of 4.99% (or, upon election of the Investor, 9.99%)
of the outstanding Common Stock. In addition to the beneficial ownership limitations in the Convertible Note, the sum of the number of
shares of Common Stock that may be issued under that certain Purchase Agreement (including the Convertible Note and Warrant and Common
Stock issued thereunder) is limited to 19.99% of the outstanding Common Stock as of April 19, 2024 (the “Exchange Cap”, which
is equal to 16,007,325 shares of Common Stock, subject to adjustment as described in the Purchase Agreement), unless shareholder approval
(as defined in the Purchase Agreement) (“Stockholder Approval”) is obtained by the Company to issue more than the Exchange
Cap. The Exchange Cap shall be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse
stock split or other similar transaction. The Company adopted ASU 2020-06 as of January 1, 2023. This ASU removes the concepts of a beneficial
conversion feature and cash conversion feature from the ASC guidance. The Company recorded a loss on debt issuance of $0.9 million. As at
June 30, 2024 the outstanding principal was $2.16 million with fair value of $2.32 million at that date. The Company also recorded a $0.2
million loss on movement in fair value in the three months to June 30, 2024. Other Debt: The Solis Bonds In January 2021, the Company
approved the issuance by one of its subsidiaries, Solis, of a series of 3-year senior secured green bonds in the maximum amount of $242.0
million (€200.0 million) with a stated coupon rate of 6.5% + EURIBOR and quarterly interest payments. The bond agreement is for repaying
existing facilities of approximately $40.0 million (€33 million), and funding acquisitions of approximately $87.2 million (€72.0
million). The bonds are secured by the Solis Bond Company’s underlying assets. The Company raised approximately $125.0 million (€110.0
million) in the initial funding. In November 2021, Solis Bond Company DAC, completed an additional issue of $24.0 million (€20.0
million). The additional issue was completed at an issue price of 102% of par value, corresponding to a yield of 5.5%. The Company raised
$11.1 million (€10.0 million) in March 2022 at 97% for an effective yield of 9.5%. In connection with the bond agreement the Company
incurred approximately $11.8 million in debt issuance costs. The Company recorded these as a discount on the debt and they are being amortized
as interest expense over the contractual period of the bond agreement. As of June 30, 2024 and December 31, 2023, there was $87.3 million
and $166.1 million outstanding on the Bond, respectively. As of June 30, 2024, Solis
was in breach of the three financial covenants under Solis’ Bond terms: (i) the minimum Liquidity Covenant that requires the higher
of €5.5 million or 5% of the outstanding Nominal Amount, (ii) the minimum Equity Ratio covenant of 25%, and (iii) the Leverage Ratio
of NIBD/EBITDA to not be higher than 6.5 times for the year ended December 2021, 6.0 times for the year ended December 31, 2022 and 5.5
times for the period ending on the maturity date of the Bond. The Solis Bond carries a 3 months EURIBOR plus 6.5% per annum interest rate,
and has quarterly interest payments, with a bullet payment to be paid on the Maturity Date. The Solis Bond is senior secured through a
first priority pledge on the shares of Solis and its subsidiaries, a parent guarantee from Alternus Energy Group Plc, and a first priority
assignment over any intercompany loans. Additionally, Solis bondholders hold a preference share in an Alternus holding company which holds
certain development projects in Spain and Italy. The preference share gives the bondholders the right on any distributions up to EUR 10
million, and such assets will be divested to ensure repayment of up to EUR 10 million should it not be fully repaid by the Maturity Date. Additionally, because Solis
was unable to fully repay the Solis Bonds by September 30, 2023, Solis’ bondholders have the right to immediately transfer ownership
of Solis and all of its subsidiaries to the bondholders and proceed to sell Solis’ assets to recoup the full amount owed to the
bondholders which as of June 30, 2024 is currently €80.8 million (approximately $86.6 million). If the ownership of Solis and all
of its subsidiaries were to be transferred to the Solis bondholders, the majority of the Company’s operating assets and related
revenues and EBIDTA would be eliminated. On October 16 2023, bondholders
approved to further extend the temporary waiver to December 16, 2023. On December 18, 2023, a representative group of the bondholders
approved an extension of the temporary waivers and the maturity date of the Solis Bonds until January 31, 2024, with the right to further
extend to February 29, 2024, at the Solis Bond trustee’s discretion. The bondholders further extended the bonds monthly and which
was subsequently approved by a majority of the bondholders on January 3, 2024. On March 12, 2024, the Solis Bondholders approved resolutions
to further extend the temporary waivers and the maturity date until April 30, 2024 with the right to further extend to May 31, 2024 at
the Bond Trustee’s discretion, which it granted, and thereafter on a month-to-month basis to November 29, 2024 at the Bond Trustee’s
discretion and approval from a majority of Bondholders. Subsequently, the Solis bondholders have approved monthly resolutions to further
extend the temporary waivers and the maturity date of the Solis Bonds to August 31, 2024. As such, the Solis bond debt is currently recorded
as short-term debt. On December 28, 2023, Solis
sold 100% of the share capital in its Italian subsidiaries for approximately €15.8 million (approximately $17.5 million). On January 18, 2024, Solis sold 100% of the share capital in its Polish
subsidiaries for approximately €54.4 million (approximately $59.1 million), and on February 21, 2024 Solis sold 100% of the share
capital of its Netherlands subsidiary for approximately €6.5 million (approximately $7 million). Additionally, on February 14, 2024,
Solis exercised its call options to repay €59,100,000 million (approximately $68.5 million) of amounts outstanding under the bonds.
Subsequently, on May 1, 2024 Solis made an interest payment of €1,000,000 (approx. $1,069,985.00) to the Bondholders, which is approximately
50% of the total interest due for the first quarter of 2024. The remaining interest amount from the first quarter and the interest amount
due for the second quarter remain outstanding at the date of this report. Solis will incur a late payment penalty in accordance with the
Bond Terms until such time as the full interest amount due is paid. The Company has made full provision for the unpaid interest as of
June 30, 2024. On December 21, 2022, the Company’s
wholly owned Irish subsidiaries, AEG JD 01 LTD and AEG MH 03 LTD entered in a financing facility with Deutsche Bank AG (“Lender”).
This is an uncommitted revolving debt financing of €500,000,000 to finance eligible project costs for the acquisition, construction,
and operation of installation/ready to build solar PV plants across Europe (the “Warehouse Facility”). The Warehouse Facility,
which matures on the third anniversary of the closing date of the Credit Agreement (the “Maturity Date”), bears interest at
Euribor plus an aggregate margin at a market rate for such facilities, which steps down by 0.5% once the underlying non-Euro costs financed
reduces below 33.33% of the overall costs financed. The Warehouse Facility is not currently drawn upon, but a total of approximately €1,800,000
in arrangement and commitment fees is currently owed to the Lender. Once drawn, the Warehouse Facility capitalizes interest payments until
projects reach their commercial operations dates through to the Maturity Date; it also provides for mandatory prepayments in certain situations. On March 21, 2024, ALCE and
the Sponsor of Clean Earth (“CLIN”) agreed to a settlement of a $1.2 million note assumed by ALCE as part of the Business
Combination that was completed in December 2023. The note had a maturity date of whenever CLIN closes its Business Combination Agreement
and accrued interest of 25%. ALCE issued 225,000 shares to the Sponsor in March 21, 2024 and a payment plan of the rest of the outstanding
balance was agreed to with payments to commence on July 15, 2024. The closing stock price of the Company was $0.47 on the date of issuance.
Payments have not commenced as of the date of this and management is in active discussions to extend the July 15 date. |
