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Letter to ADGE Shareholders

Dear Shareholder:                                                                                                       January 5, 2015

While 2014 was a very challenging year for American DG Energy (NYSE MKT: ADGE), substantial accomplishments were made that will have a major impact on the business in 2015 and for years to come. Bold steps were taken to improve our finances and organize our balance sheet to ensure the long term health of our company. Both revenue and energy production achieved double-digit growth and record highs. Our management team was expanded with the additions of Benjamin Locke, Co-CEO, and Gabriel Parmese, CFO. An increased focus on operation efficiency was highlighted by the hiring of Bernardo Borges as Chief Engineer.  Our sales effort has been re-focused to better match the marketplace. While we believe ADGE is currently undervalued in the market, the measures that have been implemented and being adopted should have a very positive effect on the business.

2014 Highlights

During 2014, $14.3 million was added to our equity through raising new capital, converting our convertible debt into equity and converting the interest payments into equity; thus, considerably saving future principal and interest payments. In fact, the majority of the interest burden of the Company’s convertible debt has dissipated as future interest on all debt is currently expected to be less than $150,000 per year.  We raised $9.2 million of new capital in the year through: a common offering of stock, private placement of stock, placement of convertible debt and a five year loan. As a result of these actions, our consolidated balance sheet is strong as we begin 2015. Our EuroSite Power (OTCQB: EUSP) subsidiary, as a stand-alone entity, also is well positioned, as it benefited substantially from financing efforts in the fourth quarter of 2014. The EUSP increase in equity and its portion of this new capital during the fourth quarter is $4.5 million.

These moves have a transforming effect on the business as we now have the capital to sustain and grow our Company; and a much lower annual cash burden from debt.

Our revenue grew by 16% during the first three quarters of 2014, compared to the same period in 2013. Our UK based subsidiary, EUSP revenue grew 152% during the same period. Total energy production was approximately 82.7 million kWh or a 10% increase during the first three quarters of 2014, compared to the same period in 2013. EUSP’s total energy production was 13.5 million kWh or a 100% increase during the same period.

ADGE has 120 energy systems operating with a backlog of 26 energy systems. The total revenue value of our On-Site Utility energy agreements since inception is approximately $317 million using various market assumptions and estimates made by the Company.

In the US, as of September 30, 2014 we have installed 7,818 kW of CHP energy systems, 4,450 tons of cooling and 58,224 MBUs of hot water in 51 properties. During the 12 months ending September 30, 2014, we added 14 energy systems representing 725 kW of CHP energy, 380 tons of cooling and 5,380 MBUs of hot water. One of our biggest gains was installing 5 new energy systems at a major New Jersey college. We now own 15 energy systems on campus with an estimated annual revenue value of $2.7 million per year. More opportunities exist on campus as we continue to work with the college’s leadership to conserve capital, lower energy costs and reduce their carbon impact.

In the UK, 21 energy systems sized at 2,068 kW have been installed with a backlog of an additional 11 energy systems. Highlights include start-up of the first energy system for the National Health Service (NHS) at Clifton Hospital and commissioning of our largest UK system to date at Crow Wood Leisure Centre. Installation of systems in backlog continues at a pace with a further 840 kW already under construction on site. Nine new agreements were signed during the period including 7 hotels with the Menzies hotel chain, owned by the Topland Group.

ADGE achieved a significant accomplishment by establishing a partnership agreement with CommunityWorks, a division of Morrison Senior Living, representing 450 facilities in 41 States. We have already signed two properties to On-Site Utility energy agreements and are working closely with the CommunityWorks team at numerous other locations.

"When Green Hill Retirement Community in West, Orange New Jersey reached out to us for an innovative solution to help reduce energy spend and extend the life of their existing boiler plant, we jumped at the opportunity to help," said Regional Director of Operations for Morrison's CommunityWorks, Tim Ross. "The request proved timely, as we were already in the process of assessing Green Hill's potential savings with our partners at American DG Energy.  Once the data was evaluated, we were able to provide substantial savings, carbon footprint reduction, no investment and capital savings".

"The cogeneration opportunity that Morrison's CommunityWorks provided to Green Hill allowed the community to jump decades ahead of their competitors in terms of energy use and savings," said National Project Manager for Morrison's CommunityWorks, Ken Waddington. "Green Hill's cogeneration system reflects the new standard to which all other senior living communities should strive to achieve".

ADGE continued to be very active communicating its business and benefits in the market through events and on-line. A few selected highlights consist of speaking engagements at events such as: Boston Green Tourism, PEW Charitable Trust, AEGIS Capital Corp Healthcare and Technology Conference, and EEI Financial Conference; and awards such as being selected as one of Buildings Magazine “Money Saving Products 2014” and being nominated for an award by the Small Business Association of New England (SBANE).

Looking Ahead

As 2015 begins, we are focused on and well positioned for  the challenge of boosting new sales, turning backlog sales into operating equipment at a faster rate and working towards making our cash outflows from operations for both ADGE and EUSP positive.

  • Restructuring Sales
    • Expanding relationship with CommunityWorks and similar large organizations
    • Focusing on territories and customers with high incentives and incorporating investment tax scenarios to boost project value
    • Concentrating on sales partners that have the greatest prospect of success
    • Revisiting the individual property holders that fueled our earlier high growth
    • Building upon successes with existing customers
    • Continuing to expand technology offering to match customer needs, especially replacement equipment
    • Converting our strong sales pipeline into closed deals
    • Targeting each of our backlog sites to expedite start-up, and instituting measures to improve engineering and project management for future customer sites
  • Reviewing all aspects of existing operating sites to improve efficiency and profitability where possible.


Combining these internal measures being implemented with broader market events such as rising electricity rates, increased need for clean and efficient energy technology and the universal power of a no capital solution, we are ready for the opportunities in 2015.

After our 2014 year-end audit, we will schedule a shareholder conference call.

Thank you for your ongoing support.



John N. Hatsopoulos                           Benjamin M. Locke                                 Barry Sanders

Co-CEO                                               Co-CEO                                               President & COO


On-Site Utility

American DG Energy sells the energy produced from an On-Site energy system to an individual property as an alternative to the outright sale of energy equipment.  On-Site Utility customers only pay for the energy produced by the system and receive a guaranteed discount rate on the price of the energy.  All system capital, installation and operating expenses are paid by American DG Energy. 

About American DG Energy

American DG Energy supplies low-cost energy to its customers through distributed power generating systems. We are committed to providing institutional, commercial and small industrial facilities with clean, reliable power, cooling, heat and hot water at lower costs than charged by local utilities - without any capital or start-up costs to the energy user - through our On-Site Utility energy solutions. American DG Energy is headquartered in Waltham, Massachusetts. Learn more about how American DG Energy reduces energy costs at or follow us on Facebook and Twitter.

NOTE: kilowatt-hour (kWh) and kW (kilowatt) are measures of energy. While typically electricity, we occasionally use kWh to represent total energy from all sources (electricity, heat, hot water and cooling).



This letter contains forward-looking statements under the Private Securities Litigation Reform Act of 1995 that involve a number of risks and uncertainties. Important factors could cause actual results to differ materially from those indicated by such forward-looking statements, as disclosed on the Company's website and in Securities and Exchange Commission filings. This letter does not constitute an offer to buy or sell securities by the Company, its subsidiaries or any associated party and is meant purely for informational purposes. The statements in this letter are made as of the date of this letter, even if subsequently made available by the Company on its website or otherwise. The Company does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.