WASTE FEEDSTOCK WESTINGHOUSE PLASMA GASIFICATION SYNGAS. Evolved Energy

Transcription

1 WASTE FEEDSTOCK WESTINGHOUSE PLASMA GASIFICATION SYNGAS Evolved Energy A n n u a l R e p o r t

2 Commercially Proven Energy Solutions Alter NRG provides energy-from-waste solutions through its wholly owned subsidiary, Westinghouse Plasma Corporation. Tees Valley, UK Placed gasifier order late 2011 Owner: Air Products Capacity: 950 tonnes per day Feedstock: Municipal solid waste Output: Power Mihama-Mikata, Japan Commissioned in 2002 Owner: Municipality Capacity: 24 tonnes per day Feedstock: Municipal solid waste and waste water sludge Output: Syngas is combusted to provide heat Nagpur, India Constructed in 2010 Owner: SMSIL Capacity: 72 tonnes per day Feedstock: Hazardous waste Output: Power Yoshii, Japan Commissioned in 1999 Owner: Hitachi Metals, Hitachi Ltd. Feedstock: Municipal solid waste Output: Syngas Pune, India Commissioned in 2009 Owner: SMSIL Capacity: 72 tonnes per day Feedstock: Hazardous waste Output: Power Kinura, Japan Commissioned in 1995 Owner: IHI Inc. Feedstock: Incinerator ash Output: Vitrified ash Utashinai, Hokkaido, Japan Commissioned in 2003 Owner: Hitachi Metals, Hitachi Ltd. Capacity: 220 tonnes per day Feedstock: Municipal solid waste and auto shredder residue Output: Generates salable Power Westinghouse Plasma Center In operation since 1990 Owner: Alter NRG Capacity: 48 tonnes per day Feedstock: Over 100 different feedstock tested Output: Syngas Westinghouse Plasma Gasification Technology Creates Energy Independence and Environmentally Sustainable Waste Management Solutions

3 Contents WASTE FEEDSTOCK WESTINGHOUSE PLASMA GASIFICATION Alter NRG Corp.: Vision & Mission Fourth Quarter Highlights Executive Chairman s Message Leadership Westinghouse Plasma Gasification: Key Enabling Technology Evolved Energy: Key Project Milestone Sales Pipeline & Strategic Backlog Management's Discussion and Analysis Management s Report Independent Auditor s Report Consolidated Financial Statements Notes to the Consolidated Financial Statements Corporate Information SYNGAS POWER FUEL OIL REPLACEMENT Alter NRG Provides Evolved Energy Solutions We have commercially proven technology that provides the next generation of energy-from-waste solutions. With reference facilities, a strong customer base and a worldwide demand for renewable energy, we are well positioned for significant growth. BIOFUELS Alter NRG Annual Report

4 Alter NRG Corp. Alter NRG OWNS 100% of the Westinghouse Plasma Technology Which Takes All Types of Waste and Converts It into Useable Energy - Solving Two Major Challenges: WESTINGHOUSE PLASMA GASIFICATION CYCLE WASTE FEEDSTOCK Diverting waste from landfills Providing a clean and renewable source of domestic energy MUNICIPAL Alter NRG is pursuing alternative energy solutions to meet the growing demand for environmentally responsible and economically viable energy in world markets. The Company s primary objective is to accelerate the adoption of the Westinghouse Plasma Gasification Technology providing renewable and clean energy solutions from a wide variety of feedstocks for a wide variety of energy outputs including liquid fuels like ethanol and diesel, electrical power, replacing fuel oil and using syngas to create heat, or steam for industrial use. With plasma systems in operation for 20 years and converting waste into energy since 2002, this technology is commercially proven and has lower emissions than conventional energy technologies. INDUSTRIAL BIOMASS THE WESTINGHOUSE PLASMA SOLUTION IS EVOLVED ENERGY: 1. Environmentally Superior Performance waste can be landfilled, burned and composted, but treating waste with plasma gasification results in lower emissions that are consistently below regulatory standards - this is the evolution of waste treatment. 2. Industry Leading Technology with the longest commercial history and the largest scale of solutions Westinghouse Plasma has evolved as the industry leader. HAZARDOUS COMMODITIES 3. Fully Engineered Solution Our product has evolved and has been adopted and passed due diligence by world leading Fortune 500 and engineering companies. 4. Strong Business Plan the business plan has evolved with more aggressive outbound sales and marketing of this important technology. This evolution has been supported by changes in the board and management team to support the next generation of plasma gasification 5. Strong customer base Alter NRG has contractual relationships with leading Fortune 500 customers, leading engineering companies, and dozens of developers worldwide. Facilities are being built and our pipeline of opportunities continues to grow. We have evolved to a large scale, commercially and economically viable energy solution. ELECTRICITY FUEL OIL REPLACEMENT LIQUID FUELS 4 Alter NRG Annual Report 2011

5 Gasifier Our Vision To provide the leading technology platform for converting the world s waste into clean energy for a healthier planet. Our Mission As the industry leader, we will forge and dominate an industry segment that transforms current waste management practices. We build shareholder value by enabling our customers to convert waste into clean energy by providing plasma gasification products, services and solutions that are innovative and environmentally friendly. Alter NRG Annual Report

6 Fourth Quarter Highlights (to March 20, 2012) 2011 was a year of transition where the Company evolved in three major ways: 1. Selling non-core assets to be completely focused on the Westinghouse Plasma Gasification Solution. 2. Receiving a $22 million purchase order for our large scale gasifier from a Fortune 50 0 company. 3. Focusing the business plan on more aggressive sales and marketing of our market ready products. The newly appointed CEO, Mr. Howard states I am very pleased to join Alter NRG that as the CEO. The Company has the industry leading plasma gasification technology which offers a sustainable solution to both solid waste management as well as renewable energy generation. Having multiple reference facilities coupled with the recent announcement of a $22 million purchase order from a Fortune 500 customer puts Alter NRG in a strong position for future growth and adding shareholder value. I am excited to bring my experience in renewable energy infrastructure technology to Alter NRG to accelerate the adoption of this important technology. Sales of $6.7 million which is the largest annual plasma revenues in the Corporation s history. Received a $22 million purchase order from Air Products, a US based Fortune 500 company for their Tees Valley project in Northern England which intends to take 950 tonnes per day of processed household waste and convert it into 49 MW of electricity, enough to power over 50,000 homes. Worked with SMS Infrastructures ( SMS ), who already has constructed two hazardous waste facilities in India using the Westinghouse Plasma technology, and is now pursuing two additional projects and a further portfolio of hazardous waste projects which continue to advance. Provided syngas to Coskata, Inc. ( Coskata ) at the Westinghouse Plasma Centre in Pennsylvania. Coskata has a proprietary syngas to ethanol conversion technology that is using the Westinghouse Plasma technology to create syngas from biomass and waste. The Coskata technology has been chosen for a waste to ethanol project in Australia that is being advanced and is expected to be a $50 million technology sale to Alter NRG, upon successful development. The consortium (called Flex Ethanol) performed a successful waste to ethanol test at the Westinghouse Plasma Centre. Executed upon a $1.9 million sale of plasma torches for use in an industrial application. 6 Alter NRG Annual Report 2011

7 Finalized the detailed engineering for the construction of a demonstration facility by Wuhan Kaidi ( Kaidi ) in the Wuhan province of China and constructed the plasma torches. Upon successful demonstration, Kaidi has up to 150 biomass-to-energy projects which they expect to develop in the Central China market over the next 15 years using the Westinghouse Plasma technology. The revenue to Westinghouse Plasma is expected to be US$3 to US$5 million per facility. Advanced the detailed engineering and construction of the plasma torches for a demonstration facility in Shanghai which will be integrated with an existing incinerator to take the incinerator ash as well as other difficult feedstocks. Upon successful demonstration, the revenue to Westinghouse Plasma is expected to be US$5 to US$10 million per additional facility and they have identified 13 current incinerators around Shanghai as targets. The Westinghouse Plasma technology has shown that it can handle a wide variety of biomass and waste material, and consistently deliver synthesis gas that is of the quality and specification that Coskata needs for the production of cellulosic biofuels. We look forward to working together with Alter NRG on commercial opportunities to deliver this industry leading waste to fuel solution. Bill Roe, CEO, Coskata Completed the second phase of engineering on a project in Minnesota being developed by the Koochiching Development Authority. The proposed project which is to be located in Koochiching County in Northern Minnesota is called the Renewable Energy Clean Air Project. This project could result in an approximate US$12 million technology sale. Received the first milestone payment on a license agreement in Australia and New Zealand with Phoenix Energy (formerly Moltoni Energy) for $5.75 million payable in increments over 5 years. Phoenix Energy is a private development company with experience in both waste and large power facilities and they have a dozen planned energy-from-waste projects in the region. Continued the regulatory process and stakeholder relations efforts for the Dufferin County energy-from-waste project in Ontario, Canada, an approximate 6.5 MW facility. This would be an approximate $12 million sale of Westinghouse Plasma equipment. In addition to the above highlights, Alter NRG tours potential new customers to the facilities in Japan, India and the Westinghouse Plasma Centre operated by us Madison Pennsylvania on a regular basis. In the last 6 months, we have had numerous Fortune 500 and equivalent companies perform further due diligence on the Westinghouse Plasma Solution and are negotiating various license agreements. We expect to be adding new strategic, and industry leading customers in Corporate Activity Announced the sale of CleanEnergy, the Corporation s geoexchange division, for $5 million to focus its efforts entirely on plasma gasification. This transaction is expected to close in April Sold a non-core coal asset for cash proceeds of US$5.0 million and executed an agreement for the sale of a steam turbine for $1.75 million which improved the Corporation s working capital position. Hired Walter Howard as Chief Executive Officer. Mr. Howard brings more than 30 years of global project development and specifically, renewable energy experience including energy-from-waste, wind and water projects. Within these industries Mr. Howard has successfully executed technology development and implementation, project development and execution, as well as project finance. Appointed Kevin Bolin as Executive Chairman, who has an extensive background in the energy-from-waste industry. Completed the necessary filings for a $20 million Committed Equity Facility provided by Haverstock Master Fund. The 24-month agreement enables the Corporation to receive in aggregate $20 million through individual drawdowns of up to $500,000. Timing of any drawdown is at Alter NRG s sole discretion and the Corporation is also able to set a minimum price for each drawdown. Alter NRG Annual Report

8 Executive Chairman s Message 2011 was an important year for Alter NRG. We needed to evolve our Company to ready ourselves for the next stage of value creation. This included garnering the right focus and shedding what was not core to our franchise. Accomplishments this year include: developing a strategy to monetize the value of the Company and put us in a position for growing positive cash flows in 2012 and beyond; directing our corporate resources on project and key milestone delivery; and adjusting our leadership so that we can execute and create value for years to come. By accomplishing these things we are now moving forward quickly. We are now poised to create long-term value. To me, it is a very exciting time at Alter NRG. I would be remiss if I didn t directly address the performance of our share price to our shareholders in this message. It would be easy to excuse our recent market performance on the current overall conditions, widespread investor fatigue and fears of global slowdown - it would also be wrong. Our investors need to see execution and revenue growth. Growth can only come with focus and execution. Early in the year we explored strategic alternatives for the Company in order to achieve the best value for shareholders. The process resulted in the return of our focus to our Westinghouse Plasma business in addition to the sale of non-core assets, which helped to strengthen the balance sheet. With focus 100% on plasma, it was determined that our shareholders would be best served by a modification to our strategy, management and Board. The evolution of our Company has been a journey with some detours, but looking back we can confidently say that we have done an excellent job in creating potential value through advancing our technology development and commercial readiness. Since acquiring Westinghouse Plasma in April of 2007, the Company significantly improved the core plasma gasification technology by enhancing performance, reliability, and the overall economics. This began with leveraging our existing demonstration and commercial facilities, and then expanding our product offering to a full gasification solution, which can be integrated with other conventional equipment to create renewable energy from waste or biomass. Numerous leading engineering companies have provided technical input into our Westinghouse Plasma gasification technology, allowing us to further evolve and extend our technical and commercial lead over competitors. Our technology is commercially deployed. We have operating plants and customers utilizing our plasma gasification offering as substantiated by the $22.4M sale announced in December to Air Products and Chemicals, Inc. The scope of this order includes engineering, fabrication and construction of a plasma gasifier for installation at their proposed Tees Valley Renewable Energy Facility in Northeast England. Our technology is commercially ready for demanding applications substantially up the value chain. 8 Alter NRG Annual Report 2011

9 Realizing that the Air Products success was a platform for growth coupled with the need to create shareholder value, a change of leadership was important for the next chapter of our Company. We have welcomed our new CEO, Walter Howard, who has experience in both the capital markets and international sales of large infrastructure technology. He comes to us as a leader in the renewable energy field. Mr. Howard will be focused on our new strategy which includes increasing our recurring revenue base through licensing activities and incremental project participation, enhancing our strategic partner base to generate greater sales volumes, and focusing on markets which are ready to act now. He will continue our technology leadership position, capitalize on our brand, and leverage our existing installed base to accelerate technology improvements and intellectual property. Technology improvements will focus on enhancing addressable markets and increasing margins. Finally, Mr. Howard will focus on improving our balance sheet and creating a cash flow positive business. We have a great technology, a great brand, a leading position, and a team that has the ability to capitalize on these. We listen to our Shareholders and we are committed to creating value for you. We are confident that our recent changes and focused direction will provide the results that matter to you. We are fortunate to have some long term supporters and want to take the opportunity to thank you for patiently supporting our evolution. We have achieved important progress during a time of significant change. One of the primary truths about fundamental change is that it can be easy to overestimate the speed with which it will unfold and just as easy to underestimate the impact that it will ultimately have. From that outlook, we are optimistic about the future. It is reasonable to expect a company in our position to have many exciting announcements in the near term and for years to come. WASTE FEEDSTOCK WESTINGHOUSE PLASMA GASIFICATION SYNGAS POWER FUEL OIL REPLACEMENT BIOFUELS Signing this contract will be a watershed moment for Alter NRG. This agreement represents the first sale of our largest plasma gasifier, the G65. Having a prestigious customer choose our technology provides further credibility to our product offerings. As well, the Tees Valley plant would provide Alter NRG a fifth reference plant and our first in Europe. Kevin Bolin, Executive Chairman of Alter NRG Tees Valley United Kingdom Kevin Bolin, Executive Chairman March 20 th, 2012 Alter NRG Annual Report

10 Leadership Focus on People Walter Howard became Alter NRG s second CEO on March 8, 2012 succeeding Mark Montemurro who continues to be a Director on Alter NRG s Board. Walter Howard Chief Executive Officer Walter has extensive experience in business development, project finance, and operations within the electric and water utility industries and has held CEO, COO, CFO, and SVP executive positions with utility leaders including General Electric, US Generating (an affiliate of Pacific Gas & Electric and Bechtel), Noble Environmental Power, GE Capital and J. Makowski Co. Inc (partly owned by Duke Power). With a career spanning more than 30 years, and having successfully executed technology development and implementation, project development and execution and project finance, Walter is the ideal individual to lead us from a very technically focused Danny Hay CFO Richard Fish President Kevin Bolin Executive Chairman organization into a more sales focused company and on to a successful future. Q&A with your new CEO Over the past 30 years you ve been successful in CEO, COO, CFO and SVP roles - what key factors underlie how you work? First, is a realistic and focused vision of what you want to achieve and clear expectations of the roles different parts of the organization play in achieving that vision. Second, you need to have, or assemble, the tools to reach that vision. We have those tools. They include a team with value such as honesty, respect and openness, and a winning technology base. Importantly, it is about communicating and then providing responsive services to ensure customers and shareholders see solid execution and value creation. And it s about good financial management. I am very focused on ensuring an organization has a strong financial position. What attracted you to the role of CEO of Alter NRG? Simply put, the Westinghouse Plasma technology is the best in class and is the industry leader. I was very attracted to the challenges and opportunities it presents in terms of capitalizing on a strong technology and translating that into profitable growth, while at the same time contributing to the good of the planet. What does success look like for you in this role? I am looking forward to building on the excellent platform established by previous management, particularly in areas such as project execution, further progress on the design and engineering of our core offering at the same time as focusing on increasing our sales pipeline and responsibly managing our resources. Through solid execution, I am confident that Alter NRG can improve investor sentiment. Joining Alter NRG in 2006, Danny is one of three original employees. In 2007 he led the complex process of taking Alter NRG public and was central in evaluating the company s readiness and assessing market acceptance. In addition to his role as CFO wherein he oversees the finance and accounting of Alter NRG, he also successfully leads the company s Investor Relations initiatives as well as the Corporate Development group responsible for marketing; corporate communication to investors, customers and partners; scoping analytical models and product development. Originally Richard joined Alter NRG as Chief Marketing and Sales Officer in February His role transitioned to Chief Operating Officer in late 2009 where his processes and guidance in the Plasma group led to positive operating results for the first time in the company s history. Richard was then appointed President of Alter NRG in November 2010 where his strong track record in restructuring was leveraged. He has been focused on process improvements and driving profitable growth since that time. Kevin joined the Alter NRG Board of Directors in November 2009 bringing licensing, project development and strategic planning expertise. Kevin was appointed Executive Chairman in September 2011 in order to lead the Company through a strategic direction change. He is currently on the Board of Directors of EnerTech Environmental, Inc., a private renewable energy company that converts biomass, primarily municipal sewage sludge, into clean fuel. Kevin led the Atlanta-based company since its inception in 1992 and was involved in all aspects of its growth and development, both domestically and internationally. 10 Alter NRG Annual Report 2011

11 Alter NRG s Board of Directors take their primary responsibility of ensuring the greatest shareholder value and protecting the shareholders assets seriously. The Board has been very active over the last year with management in participating in the Company s ongoing strategic planning process. Together with management, the Board has focused on specific strategic themes, including growth and the strategic management of cost, risk and talent. Their experience brings an independent, balanced and value-added perspective to this process. Nancy M. Laird Lead Director Brent J. Conway Director Joseph Schwager Director Michael E. Heier Director Mark A. Montemurro Director Nancy was appointed to the Board of Directors in April She chairs the Compensation and Governance Committee. She was appointed Lead Director in September 2011 to help navigate the Company through strategic direction changes. Nancy is valued for her more than 25 years of experience having served as Senior Vice President, Marketing and Midstream for PanCanadian Energy (predecessor to Encana Corporation). She is currently a board member for Keyera Corp. and Synodon Inc. and serves on various private company boards. Nancy holds a Bachelor of Arts degree (Honours) from the University of Western Ontario and earned her MBA from the Schulich School of Business at York University in Toronto. Brent was appointed to Alter NRG s Board of Directors in April 2006 and chairs the Audit Committee. Brent is currently the Chief Financial Officer of Trinidad Drilling. He graduated from the Faculty of Management at the University of Calgary with a Bachelor of Commerce in accounting. Brent received his Certified General Accountant Designation in Joe was appointed to Alter NRG s Board of Directors in June 2010 after being granted formal observer status to the Board of Directors in January He chairs the Project Review Committee. Joe founded Juniper, a consultancy that established itself as the leading independent analyst of novel waste processing technologies, assessing their capabilities and limitations and their impact upon market dynamics internationally. Through this advisory work he has developed a unique perspective on the competitive landscape and the direction of government policy. He is a board member of Viridor, one of the UK s leading waste management companies. Michael is one of the founders of Alter NRG, formally establishing the Company in In April 2007, drawing on his experience as the founder and Chairman of Trinidad Drilling he helped support the completion of Alter NRG s Initial Public Offering a significant hurdle given the challenges of generating acceptance of a new technology in a new market. He provides invaluable strategic direction and long term vision in addition to chairing the Health, Safety and Environment Committee. Mark is one of the founders, formally establishing Alter NRG in From 2006 to the end of 2011, Mark held the position of CEO of Alter NRG. He has more than 24 years oil and gas experience, focusing primarily on the application of new technologies and the commercial development of conventional and thermal heavy oil. Prior to Alter NRG, Mark was the Vice President, Thermal Operations with Deer Creek Energy from 2002 to September 2005, at which time the company was purchased by Total. He holds a Bachelor of Science degree in Chemical Engineering from the University of Calgary. Alter NRG Annual Report

12 Westinghouse Plasma: Key Enabling Technology Westinghouse Plasma Technology is the Key Enabling Technology for the energy-from-waste industry as it can convert many types of waste feedstocks into a clean Syngas. This clean syngas can be further converted into electricity, ethanol, gasoline, diesel fuel and a replacement of fuel oil. Better economics and environmental performance make plasma gasification the next generation of waste conversion technology. Commercially Proven Environmentally Superior Industry Leader Westinghouse Brand Fortune 500 Customers Large sales pipeline of existing projects FEED HANDLING PLASMA GASIFICATION SYNGAS CLEAN-UP & GAS COOLING UNMATCHED APPLICABILITY TO MARKETABLE COMMODITIES Feed Material Receiving, Storage & Conveying STEAM CYCLE COMBINED CYCLE ETHANOL DIESEL GASOLINE JET FUELS Industrial Waste ENGINES FUEL CELLS BIO FERMENTATION CALATLYTIC FISCHER- TROPSCH Commercial Waste Waste Biomass Household Waste Medical Waste Plasma Torches Air or Oxygen POWER FUEL OIL REPLACEMENT BIOFUELS Tires etc. Slag & Recovered Metals SYNGAS WIDE VARIETY OF FEEDSTOCKS LOW $ COST FLEXIBLE PROCESS GASIFIER WIDE VARIETY OF PRODUCTS HIGH $ VALUE 12 Alter NRG Annual Report 2011

13 The Westinghouse Plasma technology is a commercially proven process to convert all types of waste into valuable energy. Our process has significant benefits which have attracted world-leading innovators as our customers. We offer a range of standard products for many feedstocks and various types of projects. We s t i n g h o u s e P l a s m a G a s i f i c a t i o n h a s S i g n i f i c a n t C o m m e r c i a l A d v a n t a g e s Minimal feedstock preparation Typically a pre-sorting of recyclables and a one stage shredding of the material Handles a wide range of feed compositions High moisture content High inert content Blend any number of solid or liquid feedstock s Ability to blend feedstocks reduces project feedstock risk and significantly increases project economics High reliability Operates in rugged industrial applications Over 500,000 hours and 20 years of industrial use of the plasma torches Diverse Gasification Portfolio Standard platforms P 5 Replaces up to 50,000 bbls/yr of fossil fuel 30 to 100 tpd of Waste Produces up to 5 MW electrical W 15 Replaces up to 150,000 bbls/yr of fossil fuel 100 to 290 tpd of Waste Produces up to 15 MW electrical G 65 Replaces up to 650,000 bbls/yr of fossil fuel 450 to 1000 tpd of Waste Produces up to 50 MW electrical Engineering services Feasibility Study Design Basis Memorandum (DBM) Process Design Package (PDP) Scope of supply Feed Inlet Plasma gasification reactor Plasma torch systems Slag solidification system Initial syngas cooling & cleaning Syngas Cleaning Systems Low emissions and waste by-products Syngas, after cleanup, burns clean like natural gas Vitrified slag is inert/non-leaching and is being used as a construction aggregate Low greenhouse gas footprint when compared to alternative methods of creating power In the Westinghouse Plasma Gasification configuration, the gasifier will process waste materials and create a commodity grade clean syngas. By controlling the amount of syngas as a percentage, the facility benefits from the significant economic and environmental attributes of the syngas. Alter NRG Annual Report

14 Evolved Energy: Key Project Milestone Te e s Va l le y P roj e c t i s a s ig n i f ic a n t m i le s t on e i n t he Evo lut ion o f t he We s t i n g h o u s e P la s m a Te c h no lo g y : Validation by a well respected Fortune 500 company Scale- up of our gasification island Endorsement by government that plasma gasification qualifies for special credits and incentives Provides growing revenue for 2012 Intention to build 5 facilities under the existing license agreement I welcome the progress that Air Products has made with its project to bring advanced gasification to the UK. Energy-from-waste leads to considerable reductions in waste going into landfill, and makes an important contribution to the UK s low carbon energy supply. This new technology will be an exciting addition to the energyfrom-waste sector and I look forward to seeing the announcement of more of these projects. Greg Barker, UK Energy and Climate Change Minister In August 2011, Air Products announced regulatory approval for their energy-from-waste facility which will convert 950 tonnes of household waste into 49 MW of Power, enough to power 50,000 homes. Today s announcement makes clear the Government s commitment to supporting long-term investment in the UK s renewables industries. (Speaking about the UK s incentives for advanced conversion technologies such as Alter NRG s gasification process). Nick Clegg, The UK Deputy Prime Minister Site location for the Air Products Tees Valley project in UK. 14 Alter NRG Annual Report 2011

15 Air Products: Tees Valley, UK On December 21 of 2011, Alter NRG announced the sale of our large scale gasification island for $22 million. Alter NRG has been developing the larger scale gasification island for many years and through a lot of hard work and strong engineering skills the product is now market ready. The sale of our larger scale gasification island is a major milestone as it provides validation that our product has not only been acknowledged, but has been embraced by a renowned and reputable Fortune 500 Company. This validation is opening up many other commercial opportunities and attracting new customers that are looking for renewable energy solutions. Air Products is the perfect example of a strong customer and a relationship that has developed over time. We first started doing business with Air Products in mid-2008 as they were looking to re-enter the energyfrom-waste market (they previously owned incinerators). They selected our technology after thorough due diligence and signed a license agreement in February of Since that time they have been diligently undertaking the business development of their first facility with dedicated full-time staff working on their plasma gasification business plan supported by our core technology. It is satisfying to see our collective years of hard work and dedication pay off and to receive the purchase order for this very large facility which will take 950 tons per day of waste and convert it into 49MW of power, enough to permanently power 50,000 homes. This is evolution. We are not stopping here. Air Products has a license agreement and has publicly stated its intentions to build five of these facilities in the near term. They are focused in the United Kingdom and are continuing their business development efforts on their second project. Air Products is an extremely strong strategic customer and we look forward to continuing to support their efforts, removing waste from landfills and creating clean and renewable energy solutions. Air Products hopes to build up to five advanced gasification plants in the UK in the coming years, amounting to an investment of more than 1bn and with the potential to generate around 250 MW of electricity Ian Williamson, Air Products European Hydrogen and Bioenergy Director (Aug 11, 2011) Artist rendition for the Tees Valley projects, in Billingham, UK Alter NRG Annual Report

16 Sales Pipeline We s t i n g h o u s e P l a s m a i s s o u g h t o u t a s t h e m a r k e t l e a d e r i n p l a s m a g a s i f i c a t i o n. R e c o g n i z e d f o r o u r c l e a n a n d r e n e w a b l e a l t e r n a t i v e e n e r g y t e c h n o l o g y, a t t h e f o r e f r o n t o f t h e i n d u s t r y a n d w i t h a m a t u r i n g p i p e l i n e, We s t i n g h o u s e P l a s m a i s c o n t i n u i n g t o g r o w i t s c u s t o m e r b a s e w o r l d w i d e. Engineering Services Equipment Supply Westinghouse Plasma Corp. provides a complete design build solution for the Westinghouse Plasma technology and equipment scope of supply consists of the energy-from-waste market. Our project scope is designed to minimize execution Plasma gasification reactor, plasma torch systems, slag solidification system and risk and provide the best possible solutions and service for our customers. From initial syngas cooling & cleaning. Westinghouse Plasma executed upon a $1.9 detailed facility engineering to the start-up and commissioning of the facility. million sale of plasma torches for use in an industrial application. Westinghouse Plasma has a very skilled engineering technical team that provides customers with support for The Westinghouse Plasma their project, including technology has been selected initial engineering services, for proposed projects being feasibility study and advanced worldwide that are detailed engineering. in active project development Licensing Revenues by numerous industry leading Westinghouse Plasma companies. Projects result in continues to support sales of ~$10 to $25 million developing projects located each. As the pipeline worldwide as well as continues to mature, the advance licensing revenues and cashflows of discussions with various Operating Projects large, credible companies. Projects Under Construction We received the first Engineering Stage milestone payment on a Proposed Projects Proposed Projects Operating Projects Projects Under Construction Engineering Stage license agreement in Australia and New Zealand with Phoenix Energy (formerly Moltoni Energy) for $5.75 million payable in increments over 5 years. Strategic Partners: 16 Large Sales Pipeline Alter NRG Annual Report 2011 Alter NRG will continue to increase.

17 Strategic Backlog Companies that have signed license agreements with Alter NRG many years ago continue to advance their business plan. A selection of these companies are highlighted in the table below. In addition to these companies, there are dozens of other developers that are advancing projects - many with the sole focus of building Westinghouse Plasma gasification projects. This is a pipeline with customers that have put in years of time, effort and capital to move projects forward around the world. Our customer base continues its evolution to larger, well capitalized companies. Customers License Current Activity Business Plan Facility type Revenue per Facility Air Products Jan projects in UK, Italy and Spain Facility under construction in Tees Valley, England To build up to five advanced gasification plant in the UK to generate around 250 MW of electricity" August 11, 2011 Municipal waste to electricity $25 million SMS June 2010 Already built two We have aggressive plans to develop and build plasma Hazardous waste to Infrastructure Indian partnership agreement facilities, currently advancing 3 additional facilities gasification facilities ourselves and for our customers in India and the Middle East. We have dedicated 140 people to expanding our plasma gasification business and we expect to construct up syngas and electricity $2 to $10 million to 4-5 facilities over the next 2-3 years. Wuhan Kaidi May 2010 Building a We are pleased to be working with the Westinghouse plasma Biomass to power China strategic alliance demonstration facility solution and believe it provides fuel flexibility for the more than 150 biomass projects that we plan to develop throughout China. and ethanol $2 to $5 million GTS Shanghai Dec 2010 China incineration project Building a demonstration facility Taking incinerator ash and other industrial feedstocks to create syngas, and blend the syngas into the incinerator to improve performance. GTS currently has 8 incinerators. Incineration co-processing $5 to $10 million Coskata July 2008 Built a demonstration Take clean syngas and convert it into fuel grade ethanol and Waste and biomass Project Lighthouse - preferred vendor agreement facility and completed testing using our plasma centre chemicals. They plan to use our gasifier for waste to ethanol projects within their customer base. Currently, several projects are advancing to ethanol $25 to $50 million Evolution Supported by: Alter NRG Annual Report

18 Management s Discussion and Analysis The following management s discussion and analysis (MD&A) for Alter NRG Corp. (Alter NRG, the Corporation), prepared as at March 20, 2012, provides a review of the Corporation s financial results for the fiscal period ended December 31, 2011 and consideration of future opportunities. The MD&A should be read in conjunction with the audited consolidated financial statements and accompanying notes for the Corporation for the year ended December 31, The consolidated financial statements, and extracts of those financial statements provided within this MD&A, were prepared in Canadian dollars and are in accordance with International Financial Reporting Standards. (IFRS). Certain other information with respect to the Corporation is available on Alter NRG s website ( and in public filings available through SEDAR ( Readers are cautioned that this MD&A contains certain forward looking statements. Please see the Forward Looking Statements section at the end of this document for a discussion concerning the use of such information in this MD&A. Executive Summary The Company s core focus is the Westinghouse Plasma gasification technology which is the worldwide leader in creating energy from waste using plasma gasification. We market and sell the Westinghouse Plasma technology through a wholly owned subsidiary called Westinghouse Plasma Corp ( Westinghouse Plasma ). Westinghouse Plasma is the industry leader for the treatment of all types of waste (industrial, household, commercial, hazardous, etc.) using plasma technology and converting it into useable energy such as electricity, syngas (replacement for natural gas), heat, steam, or liquid fuels such as diesel or ethanol. Our Vision To provide the leading technology platform for converting the world s waste into clean energy for a healthier planet. Our Mission As the industry leader, we will forge and dominate an industry segment that transforms current waste management practices. We build shareholder value by enabling customers to convert waste into clean energy by providing plasma gasification products, services and solutions that are innovative and environmentally friendly. Westinghouse Plasma is a commercially proven technology that is used in two commercially operating facilities in Japan that have been converting waste into energy for more than 9 years, as well as facilities operating in India and under construction in China and England. From an environmental perspective, a plasma facility will have significantly lower emissions than other alternative energy facilities and have an overall emissions profile lower than a natural gas combined cycle power facility, which is considered the cleanest fossil fuel production. From an economic perspective waste to energy projects have strong project returns in populous areas, as the projects receive revenues from tipping fees to take the waste and then also receive revenues for the sale of energy was a year of transition for the Corporation, as follows: the Corporation ran a strategic process to build its balance sheet and ending up selling several non-core assets to strengthen the working capital position, the Corporation was issued a purchase order for its scaled up Plasma gasifier from a leading Fortune 500 company that represents a significant commercial milestone. the Corporation made management changes to shift from focusing on technology development to more aggressive sales and marketing of the product which is now market ready. The Corporation has exited the year in a strong position and continues to add to its customer base with large and credible companies that are looking for a commercially proven renewable energy solution. The Corporation believes it continues to be the market leader in plasma gasification and that plasma gasification is a next generation technology that provides a more efficient and environmentally friendly waste management solution. The Corporation also has a wholly owned subsidiary called Clean Energy Developments Corp. ( CleanEnergy ) which provides heating and cooling geoexchange solutions for homes, commercial and industrial buildings using energy from the earth. During December 2011, as a result of the Corporation s strategic review, the Corporation decided to exit the geoexchange business and entered into a sales agreement to dispose of all the assets and liabilities of CleanEnergy. Accordingly, the CleanEnergy results of operations and assets and liabilities are now shown as discontinued operations. The comparative prior periods have been restated to reflect CleanEnergy as discontinued operations. 18 Alter NRG Annual Report 2011

19 Our Business Alter NRG provides and pursues alternative clean and renewable energy solutions through plasma gasification to meet the growing demand for clean energy in world markets. Westinghouse Plasma has created industry leading plasma gasification technology that provides clean and renewable energy solutions. Plasma gasification can take renewable feedstocks such as household, commercial waste, industrial waste, hazardous waste, waste biomass, or combinations of feedstocks and turn them into syngas. The syngas can be used as a replacement to fuel oil or natural gas, or converted into ethanol, diesel fuel or electricity. This provides clean energy that has a lower carbon footprint and lower emissions of other harmful pollutants and provides affordable domestic energy sources. This is a commercially proven technology being used in facilities turning waste into energy since 2002 and the Corporation can take clients to reference facilities around the world which provides a major commercial advantage. Plasma gasification facilities are large-scale energy projects. The whole facility is generally $50 million to $500 million. The sales cycle for a project is generally 3 to 7 years. In the initial project development stages, Westinghouse Plasma receives engineering fees and site license fees, which are generally $1.5 million to $6 million per project. After the project receives regulatory approvals and has project financing, customers order the plasma gasifier equipment which generally would be $10 million to $50 million depending on facility size. In the Asian market, our scope is reduced to licensing, engineering and plasma torch sales, which on these smaller scale projects are expected to be $2 million to $5 million per project. Westinghouse Plasma s project pipeline continued to mature in 2011 with projects in Russia, the United States, Poland, Spain, and England that have regulatory approval. Other projects continue to do their engineering, apply for regulatory approvals and continue to actively advance worldwide. During the maturation period the revenues associated with the project pipeline are expected to be inconsistent and concentrated on the more advanced stage projects. Westinghouse Plasma sells technology worldwide, and currently has been selected as the core technology for projects in North America, South America, European Union, Middle East and Asia Pacific. Many of these projects are being developed by Fortune 500 and other large, credible companies such as Air Products, NRG Energy, Wuhan Kaidi, SMS Infrastructures and others. The sale of our large-scale gasifier to a well respected Fortune 500 customer (Air Products) has accelerated the pace of adoption and the Corporation is currently negotiating sales agreements with large, well respected companies around the world with the intention to add to the customer base during The remaining projects are being developed by smaller entrepreneurial companies, the majority of which focus exclusively on building plasma gasification facilities using the Westinghouse Plasma technology. Westinghouse Plasma intends to support the developers that have the most advanced projects and the capability to execute on their projects. As the core technology provider of the novel and proprietary technology, Alter NRG is often able to negotiate an option to co-invest in the projects themselves. In most cases, the projects have strong project economics and are operated by well respected companies. Alter NRG intends to re-invest the cashflow from technology sales into projects with a high rate of return, operated by qualified companies, to generate recurring revenues. As well, as the Westinghouse Plasma Gasification solution continues to gain traction in the marketplace companies are looking for exclusivity in certain geographic regions. Alter NRG is currently negotiating exclusive license agreements with well respected companies which in most cases include ongoing royalties and/or an option to co-invest to provide recurring cashflows. Although this business segment is located in the United States, ongoing oversight occurs continually from the Canadian head office and the Board. Financial management is entirely centralized at the Canadian head office. Capability Industry leading technology and market position provides Alter NRG with a competitive advantage. Alter NRG is planning for strategic growth by increasing revenues and capitalizing on the competitive advantages of their Westinghouse Plasma technologies. The customer base continues to strengthen and the Westinghouse Plasma technology is actively sought out by Fortune 500 and equivalent size companies worldwide. Management is developing new sustainable energy solutions which is a long-term process and recognizes that the Corporation must generate positive cash flows or secure additional financial resources. The Corporation is increasing revenues year over year but continues to report net losses with an accumulated deficit at December 31, 2011 of $93 million. By exiting the geoexchange business, management believes they will be able to focus on sales and delivery of the Westinghouse Plasma technology and reduce the overall costs of Alter NRG. Alter NRG Annual Report

20 Selected Consolidated Financial Information Income Statement and Cash Flow For the years ended December Total revenues $ 6,711,189 $ 6,412,736 $ 1,943,462 Cost of sales 2,673,345 2,690, ,812 General, administration, selling and distribution expenses 8,871,905 11,695,431 12,219,806 Share-based payments 554,986 1,222,514 2,042,235 Depreciation and amortization 2,454,797 2,391,175 2,038,885 Foreign exchange gain (loss) 114,554 (587,318) 1,349,463 Other income 1,634, ,025 45,726 Finance (costs) income, net (458,204) 184, ,241 Write down of assets held for sale 500, Loss before tax 7,053,666 11,721,430 20,512,800 Net loss from continuing operations 4,123,382 13,239,329 18,272,366 Loss from discontinued operations 17,023,037 9,112,984 1,839,242 Comprehensive loss 20,748,825 23,244,229 20,111,608 Loss per share basic and diluted Continuing operations (0.07) (0.21) (0.32) Discontinued operations (0.28) (0.15) (0.03) Cash used in operations $ 8,507,926 $ 16,046,061 $ 11,595,441 Statement of Financial Position at December Total assets $ 63,173,939 $ 87,187,305 Total liabilities 20,050,857 23,854,469 Shareholders equity $ 43,123,082 $ 63,332, Alter NRG Annual Report 2011

21 Overall Performance CleanEnergy geoexchange As part of the strategic process, the Corporation began shifting focus in 2011 to the plasma gasification business and throughout 2011 reductions were made to CleanEnergy expenses and the concentration was on more immediate profitability of CleanEnergy projects. However, the results remained less than expected and the Company entered into an agreement to sell CleanEnergy and exit the geoexchange business. The geoexchange business has been classified as a discontinued operation and the financial statements have been adjusted to reflect CleanEnergy as discontinued operations. Accordingly this management discussion and analysis excludes CleanEnergy from the operational analysis. Plasma sales and services The Westinghouse Plasma business continues to grow. For the year ended December 31, 2011, the Corporation achieved sales growth and expenses declined significantly as the concerted efforts to control and reduce expenses across the Corporation were realized. For the year ended December 31, 2011, total revenues of $6.7M were $298,000 or 5% higher than the year ended December 31, Gross profit for the year ended December 31, 2011 was 60% as compared to the year ended December 31, 2010 of 58%. In late December 2011, the Corporation received a purchase order for its large-scale plasma gasification unit for $22.4 million, which increases the revenue base for 2012 considerably. The Corporation remains focused on decreasing expenses and has achieved success in General expenses, which include general and administration and selling and distribution, decreased 24% for the year ended December 31, 2011 to $8.9 million as compared to $11.7 million in the same period of The expenses have been decreased through focus and efficiencies and a reduction in the number of employees. Management believes they have built a strong team of people focused on further growing revenue in The Plasma business accomplished a number of important strategic milestones that are illustrative of the larger sales pipeline that continues to mature. Sales of $6.7 million which is the largest annual plasma revenues in the Corporation s history. Received a $22 million purchase order from Air Products, a US based Fortune 500 company for their Tees Valley project in Northern England which intends to take 950 tonnes per day of processed household waste and convert it into 49 MW of electricity, enough to power over 50,000 homes. Worked with SMS Infrastructures ( SMS ), who already has constructed two hazardous waste facilities in India using the Westinghouse Plasma technology, and is now pursuing two additional projects and a further portfolio of hazardous waste projects which continue to advance. Provided syngas to Coskata, Inc. ( Coskata ) at the Westinghouse Plasma Centre in Pennsylvania. Coskata has a proprietary syngas to ethanol conversion technology that is using the Westinghouse Plasma technology to create syngas from biomass and waste. The Coskata technology has been chosen for a waste to ethanol project in Australia that is being advanced and is expected to be a $50 million technology sale to Alter NRG, upon successful development. The consortium (called Flex Ethanol) performed a successful waste to ethanol test at the Westinghouse Plasma Centre. Executed upon a $1.9 million sale of plasma torches for use in an industrial application. Alter NRG Annual Report