Q4 2023 Summary
Published Feb 14, 2025, 5:29 PM UTC- Growing Global Demand for NET Power's Technology: NET Power is experiencing increasing interest from potential customers worldwide who recognize that existing renewable solutions alone are insufficient to meet net-zero ambitions without causing significant increases in power prices. This demand highlights NET Power's role in providing affordable, reliable, and clean power at scale.
- Strong Project Pipeline Beyond Project Permian: With the first utility-scale plant, Project Permian, on schedule for initial operations between mid-2027 and early 2028, NET Power is building a robust pipeline of projects, including OP1 in the MISO region and plans for Serial Number 2 (SN 2) and beyond. This indicates potential for rapid expansion and revenue growth in the coming years.
- Strategic Positioning in the Data Center Market: NET Power's technology is well-suited to meet the substantial power demands of hyperscale data centers, particularly those driven by AI. By providing low-cost, low-carbon, 24/7 reliable power, NET Power is poised to become a top choice for these applications, opening new and significant markets for the company.
- NET Power's first utility-scale plant, Project Permian, is not expected to be operational until the second half of 2027 to the first half of 2028, indicating a significant delay before revenue generation, and any further delays could impact financial performance.
- Critical components like the turboexpander from Baker Hughes and the recuperative heat exchanger from Lummus are yet to be fully tested and validated at utility-scale, and the turboexpander equipment will only arrive on site in 2026, raising concerns about potential technical challenges or delays in scaling up the technology.
- NET Power's economic proposition heavily relies on federal incentives such as the 45Q tax credits for carbon sequestration, and any changes in these policies or failure to qualify could materially affect project viability and returns.
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Commercial Pipeline Details
Q: Can you provide more color on commercial pipeline?
A: Daniel Rice explained that the primary market for NET Power is providing power to the grid with CO₂ permanently sequestered underground, focusing on regions like MISO, PJM, ERCOT, CAISO, Alberta, and the Middle East. They're seeing increased interest as companies realize net-zero goals aren't attainable with renewables alone, and NET Power offers an affordable, reliable solution. The company is creating pathways for global license deployments by involving future customers in early projects to familiarize them with the technology. -
Timeline for Future Projects
Q: Will SN2 or OP2 come online after Project Permian?
A: Daniel Rice confirmed they expect additional utility-scale plants like SN2 or OP2 to come online shortly after Project Permian, potentially within a couple of years. The first plant is expected online between mid-2027 and early 2028. They're building a backlog of projects and will prioritize them based on strategic importance to the NET Power strategy. -
Risk Profile of Validation Phases
Q: How do you view risks in validation phases at La Porte?
A: Brian Allen stated that each validation phase at La Porte is important and builds upon the previous one to retire key technical risks. The utility-scale turboexpander is being developed in parallel with testing phases. Once operations are proven at the demonstration scale, scaling up to utility-scale is less risky because they'll have already operated the full utility-size combustor at La Porte before starting Project Permian. -
Licensing Fees Impact
Q: Is the Lummus licensing fee incremental, how material is it?
A: Akash Patel explained that the Lummus licensing fee is additive but is a fraction of the NET Power plant license fee. Licensing fees are determined on a project-by-project basis, based on plant economics, and designed to incentivize cost reductions and share benefits as costs decrease. It's too early to specify the exact amount. -
Data Center Power Opportunities
Q: Challenges and opportunities for data center power offtake?
A: Daniel Rice highlighted that placing NET Power plants in optimal locations opens opportunities to supply low-cost, low-carbon power to data centers. He noted there's now more data centers in Texas than Virginia. Regions like West Virginia could become new data center hubs with lower carbon intensity and cost if NET Power plants are deployed there. The plant design aligns well with data center power loads, and they're in discussions with major tech companies. -
Control System Partner Outlook
Q: What should investors expect regarding control system partner?
A: Brian Allen stated that selecting a control system partner is critical but not as urgent as other components. They're seeking a partner aligned with their strategy, capable of scaling, respecting their IP, and focusing on cost reductions. This selection will occur over the next few quarters. -
Lummus Incentives and Schedule Adherence
Q: Does Lummus have incentives to meet your schedule?
A: Brian Allen confirmed that the strategic supply agreement with Lummus includes incentives for cost reductions, capacity build-out for manufacturing, and standardization. This aligns incentives across their three pillars to ensure partners are committed beyond just one project. -
Proprietary Analytics in Testing
Q: Are analytics proprietary or standardized benchmarks?
A: Brian Allen explained that the analytical tools are proprietary to NET Power and Baker Hughes, used in cycle design and equipment design. As they gather data, they'll update and verify their analytics and simulations, following typical engineering practices.