NET Power - Earnings Call - Q1 2025

Executive Summary

• NPWR exited Q1 2025 with “over $500 million” in cash, cash equivalents and investments; management reiterated a 2025 spend plan of ~$190M net of interest (G&A ~$45M, La Porte/R&D ~$50M, SN1 and Baker turbine ~$100M), targeting year-end cash near ~$350M.
• Reported Diluted EPS (Continuing Ops) worsened materially YoY and sequentially; S&P Global’s tracked Primary EPS actual for Q1 2025 was -$0.4137 vs consensus -$0.1141, a significant miss; revenue remains pre-commercial (consensus $0) [functions.GetEstimates*].
• SN1 cost guidance unchanged from Q4: total installed cost estimated at $1.7–$2.0B; schedule pushed out, with earliest online no earlier than 2029; post-FEED cost-down/value engineering continues, and coastal multi-unit modularity is being studied to improve LCOE.
• La Porte demo testing: Phase 1 and Phase 2 expected to complete in 2025; unplanned downtime for site repairs in Q1 but testing to resume in Q2; Phase 3 and 4 expected in 2026–2027, funded from balance sheet.
• Catalyst: Management’s public framing that the share price is “near our cash value,” implying little value for the technology; 2025 deliverables (testing, cost-down path, modular feasibility) are key narrative drivers for re-rating if met.

What Went Well and What Went Wrong

What Went Well

• Liquidity preserved: “We have no debt, and we exited the first quarter with approximately $500 million of cash and cash equivalents” with a plan to exit 2025 near ~$350M after advancing testing and cost-down milestones.
• Cost optimization focus: “We’re working to improve the project economics… mainly by reducing the total installed cost,” with coastal multi-unit deployments targeted to reduce per-unit capital and LCOE.
• Testing roadmap intact: “Both Phases 1 and 2 are expected to be completed in 2025… Preparations are underway for testing Phases 3 and 4, expected to be completed in 2026 and 2027”.

What Went Wrong

• SN1 economics challenged: FEED showed a higher-than-expected total installed cost ($1.7–$2.0B) and the need to pause long-lead releases; timeline now points to earliest online no earlier than 2029.
• Inflation/supply-chain headwinds: Management cited tight global energy equipment supply chains, cost escalation in engineered equipment and craft labor; CCGT cost benchmarks up sharply (>$2,200/kW), complicating near-term deflation hopes.
• Q1 operational hiccup: La Porte testing faced “unplanned downtime for site repairs,” pushing Phase 1 resumption to Q2 2025; still expect Phases 1–2 completion in 2025.

Transcript

Operator (participant)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Bryce Mendes, Director of Investor Relations. Thank you. You may begin.

Bryce Mendes (Director of Investor Relations)

Thank you. Good morning and welcome to NetPower's First Quarter 2025 Earnings Conference Call. With me on the call today, we have our Chief Executive Officer, Danny Rice, and our Chief Operating Officer, Marc Horstman. Yesterday, we issued our earnings release for the first quarter of 2025, which can be found on our Investor Relations website at ir.netpower.com. During this call, our remarks may include forward-looking statements. Actual results may differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with our business. These risks and uncertainties are discussed in our SEC filings. Please note that we assume no obligation to update any forward-looking statements. With that, I'll now pass it over to Danny Rice, NetPower's Chief Executive Officer.

Danny Rice (CEO)

Thanks, Bryce. Good morning, everyone. Thanks for joining NetPower's First Quarter Earnings Call. I'm pleased to share an update on our progress to deliver clean, reliable power with our proprietary NetPower cycle. Before diving into our updates, I'd like to welcome Marc Horstman, our new Chief Operating Officer, who recently stepped into this role. Marc brings over 20 years of experience in the power sector, and his expertise in product development and operational execution is already proving invaluable as we sharpen our focus on cost optimization and commercial success. As we outlined on our last call, we've established a few focus areas for 2025. First, we're working to improve the project economics for our first utility-scale plant, mainly by reducing the total installed cost.

Second, we're working to determine a viable commercial pathway to a highly competitive localized cost of energy, or LCOE for short, mainly through a combination of realizing improvements in cycle thermal efficiencies and reductions in per-unit capital costs. We expect to realize fairly meaningful cost reductions with multi-unit deployments, particularly in locations with coastal access. This year, we're working to quantify these savings with greater accuracy. Our third focus area is moving the ball down the field with our La Porte testing, which will meaningfully prove up performance expectations for our commercial-scale clean power plants. We're in a unique position where we possess the capital needed to achieve these three goals in a very cost-effective manner. We have no debt, and we exited the first quarter with approximately $500 million of cash in cash equivalents, earning roughly 5% interest per year.

For the full year, we're budgeting to spend approximately $190 million net of interest income, comprised of $45 million for G&A, $50 million for La Porte and other R&D activities to further prove out the technology, and $100 million for SN1 development and Baker turbine development for commercial deployment. We expect to exit 2025 with two stages of La Porte testing completed, a more competitive cost estimate for SN1, a better, more appropriate pathway to get to a competitive long-term LCOE, and nearly $350 million of cash on hand. Before turning to Marc for operational updates, I want to briefly address our share price and capital allocation strategy. NET Power's current trading price is near our cash value, implying the market is assigning little value to our technology.

This stands in stark contrast to other clean power technology companies, many of whom have less liquidity, longer commercialization timelines, lower technology readiness levels, and higher LCOEs, yet trading at valuations in the billions. This discrepancy really underscores a significant dislocation in how the market values our clean firm power solution and gas solutions more broadly versus these others. There's such a large cost gap between most clean firm power solutions and natural gas. Just last week, Canada announced 1.2 gigawatts of new nukes costing over $15 billion, which is nearly six times the cost of new gas-based power. It really begs the question: can NetPower get its cost lower than new nuclear? Our first plant, Project Permian, which is very likely to be the most expensive and least efficient one we ever deployed, we expect it to be much lower cost than the aforementioned nuclear plants.

Data points like this continue to reaffirm our original thesis, which is that in regions with access to low-cost natural gas and places to safely store the CO2, the lowest cost way to deliver clean, reliable power can and should come from natural gas-based solutions. Load growth should go to those markets that can generate the lowest cost, most reliable power. We are constantly assessing ways to best unlock the potential of our unique technology, a commitment we owe to our shareholders, including our major strategic investors, Oxy, Constellation, Baker Hughes, SK Group, and the Rice family, who collectively own approximately 85% of our company's equity. Our investment decisions are made with this focus in mind, and I believe our 2025 investments represent the best use of our capital to do just that.

With that, I'll now turn the call over to Marc to walk through our focus areas for this year.

Marc Horstman (COO)

Thank you, Danny. Good morning, everyone. It is an honor to step into this role at such an important time. I am excited to be a part of this earnings call. Having spent over two decades in the power sector, I have seen firsthand the challenges of balancing reliability, affordability, and sustainability. NetPower's technology is a game changer, and I am energized by the opportunity to help bring it to the market at scale. My focus as COO is to drive operational excellence and accelerate our path to cost-competitive clean energy. As Danny mentioned, we have a few key focus areas for the remainder of the year. First, it is progressing through the turboexpander validation program with Baker Hughes at La Porte.

We're currently performing some maintenance work at the site, but once we resume testing, we expect to complete the first two phases this year, as well as beginning preparations for phase three and four testing in 2026 and 2027. Second, for Project Permian, we're deep into the value engineering process. This involves scrutinizing every aspect of the plant's design, from equipment specifications to construction methods, to identify cost savings without compromising performance or safety. These efforts are critical to making SN1 a success and informing our standardized design for future plants. We're continuing to wrap up engineering work with Zachry and our key partners to arrive at a more definitive cost estimate at the end of this year. In addition, we're advancing our turboexpander design and development activities with Baker Hughes for SN1.

It's worth mentioning that the Baker Hughes turboexpander will be location agnostic and can be utilized in a NetPower plant in the Permian or somewhere else. While the status of Permian as SN1 is currently contingent upon our value engineering efforts, we're confidently moving ahead with utility-scale turboexpander development because of the equipment's flexibility to perform anywhere. Third, we're continuing to move forward with our feasibility study for a standardized modular multi-unit plant, working to arrive at a scalable configuration of potentially two to four power trains on the Gulf Coast or any coastal site for that matter. This is a pivotal cost-down exercise to validate the economic viability of future NetPower projects and will ensure that future deployments align with market demands for cost-effective, clean energy solutions.

Since we're early into the cost-down initiative for Project Permian and feasibility study for the multi-unit coastal configuration, there's not much to share today, but hope to have any key learnings we can share on next quarter's call. I'm excited to lead our operations as we move closer to commercializing our transformative technology and look forward to updating you on our continued progress. I'll now turn the call over to Danny for closing remarks.

Danny Rice (CEO)

Thanks for the update, Marc. We're energized by the progress we're making and remain committed to executing our strategy with discipline and focus. The next few months will be important as we continue to drive costs out of our first and future projects, thereby improving economics and project fundability in what continues to be a growing market for clean firm power solutions. We have work to do to unlock this pathway for us, but we have the capital to do it. We're constantly challenging ourselves, but continue to believe the investment in and the development of our clean gas technology creates the best risk-adjusted return profile for our shareholders. We appreciate your continued support and look forward to sharing more updates on our next call. Have a nice day.

Operator (participant)

Thank you. Ladies and gentlemen, this does conclude today's conference. You may disconnect your line at this time. Thank you for your participation and have a great day.