NET Power Inc. (NYSE:NPWR) Q3 2024 Earnings Call Transcript

NET Power Inc. (NYSE:NPWR) Q3 2024 Earnings Call Transcript November 12, 2024

Operator: Greetings and welcome to the NET Power Third Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Bryce Mendes, Director, Investor Relations. Thank you. You may begin.

Bryce Mendes: Good morning and welcome to NET Power’s third quarter 2024 earnings conference call. With me on the call today we have our Chief Executive Officer, Danny Rice; our President and Chief Operating, Officer Brian Allen; and our Chief Financial Officer, Akash Patel. Yesterday, we issued our earnings release for the third quarter of 2024, which can be found on our Investor Relations website along with this presentation at ir.netpower.com. During this call, our remarks and responses to questions 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, NET Power’s Chief Executive Officer.

Danny Rice: Good morning everybody and thanks for joining us. The team has some positive updates for you today. And as we’ve done on previous calls, I’ll provide some overview comments before passing it over to Brian and Akash for the operational and financial updates. We continue to focus our efforts on developing and improving our technology at the utility-scale, which starts with Baker Hughes’ validation testing at our La Porte facility. We recently kicked off Phase 1 of our equipment validation program with Baker at La Porte, which will result in the down selection of the oxy-fuel burner. I’d like to extend a big thanks to our site team and operational partners for their hard work in getting us to this point. We celebrate this milestone as it marks a critical step towards developing and improving our technology at the utility-scale and we look forward to progressing through our outlined four-phase testing program at La Porte with Baker Hughes now through 2026.

We’re excited to announce the selection of Air Liquide as our air separation supplier for Project Permian FEED, marking another significant milestone for the team. The air separation unit represents one of the major equipment components of the NET Power plant. We look forward to working alongside the Air Liquide team on Project Permian and future opportunities as we continue to build out our standardized NET Power plant design. Shifting gears, we held an Investor Day in early September where we outlined a recent market study conducted in collaboration with Boston Consulting Group. In summary, the opportunity set for 24/7 low-carbon energy is immense and our targeted North American competitive markets of MISO, ERCOT, PJM, CAISO, and AESO, we view the serviceable opportunity is as high as 2,000 NET Power plants, focusing on the areas with sufficient CO2 storage and infrastructure in place.

And again, this opportunity set is before moving into regulated markets with utilities. In our view by leveraging clean cheap and abundant natural gas, NET Power presents as the lowest cost quickest to market option to provide clean, affordable, and reliable power. And we’re focused on executing against our strategic pillars to ensure we can realize this massive opportunity set here in North America. On the market front, we continue to believe the world will be short clean baseload power and NET Power will be well-positioned to be the first-to-market with a proven and scalable clean power solution. We’ve seen a handful of announcements lately from tech firms with early-stage nuclear companies, but load growth will not wait a decade for new generation solutions to be proven out.

With Project Permian coming online in 2027/2028, we’ll be in excellent position to capture a meaningful portion of this demand nearly a decade ahead of other potential solutions. And it’s not just getting to market sooner, but it’s doing so with solutions without compromise. One of the dual challenges the grid is facing is filling large baseload growth with new clean power, while also supplying flexible peaking power to the grid. There’s no solution today that can do both at the same time but our oxy-combustion cycle inherently can do this. One of the features we’ve been advancing more thoroughly is the application of our oxygen-based storage which acts as a battery for our ASU auxiliary load. Our oxy-combustion process utilizes oxygen to generate clean power and storing excess oxygen on site enables us to utilize this oxygen in lieu of the air separation unit, which increases our net electric output.

On Slide 6, we have illustrated this configuration which we think is an entirely practical and economic way to provide power to co-located assets like data centers, while simultaneously providing peaking power to the grid. So the data center complex always receives its 24/7 power and the grid receives the peaking power of our oxygen-based storage. And in terms of storage and dispatch capacity, a day’s worth of oxygen stored equates to 1.2 gigawatt hours and dispatch can be anywhere from 15 megawatts to 80 megawatts. So we’re talking extremely large energy storage potential, which we think can be far more economical than traditional battery storage. In commercial conversations, the early response to this hybrid application has been extremely positive, and it’s something we’re looking to incorporate into many of our originated projects.

Additionally, we’ll have a small oxygen storage at Project Permian to help validate this application. While the future clean energy mix will certainly require multiple technologies, it’s a good time to reiterate what NET Power is focusing on today. We are actively progressing the financing and supply offtake discussions for our first commercial scale plant Project Permian based on current market pricing conditions. Getting our first utility-scale plant financed and operational with safe reliable operations will change the world and catalyze our future fleet deployments. Meanwhile, we continue to push forward on the origination front. Our origination approach gives us total creative latitude of how we commercialize our technology and how we structure the financial and operational terms around future NET Power clean energy hubs.

We’re developing an extensive shadow backlog of projects by tackling the low dollar early development work now, such that when our first utility-scale project is up and running we have that visibility into where the next 10-plus originated hubs can go with each hub with the ability to support two to 20 NET Power plants. At our first originated project in Northern MISO OP1, we continue to support the MISO interconnect process and are progressing through the site and permitting phase. Our interconnect there is sized for 300 megawatts. So our plan here is power from the first plant or two goes to the grid to bring reliable clean power to MISO and any future plants can be connected to the grid for peaking while baseload is servicing co-located load from data centers.

We’re in a region that we believe could have total CO2 storage capacity for a dozen or more NET Power plants. Up in Alberta, we recently signed an MOU with a local partner and are jointly progressing through the project feasibility phase. And Alberta is quickly becoming a focus area for data center growth because of favorable ambient temperatures for data center cooling, proximity to low-cost natural gas for energy and favorable industry and regulatory environments that support economic growth. Back in the US, we’re pursuing several MOUs in the western part of the country to establish NET Power hubs, again a combination of providing clean power to the grid to restore reliability plus providing co-located power for data centers. This is the right technology for what the world needs for the coming decades and we look forward to sharing more information on these opportunities when appropriate.

Quick reaction to the election — to the US election. We’re on the doorstep of commercializing a breakthrough solution that both sides can get behind, one that the power sector wants to succeed and one that the tech industry needs in order to meet their clean energy needs. We look forward to working with the new administration to facilitate broad commercialization of our clean affordable reliable power solution. So with that, I’ll hand it over to Brian for the operational updates.

Brian Allen: Thanks, Danny. I would like to echo Danny’s sentiment and congratulate our La Porte team and our partners that have worked tirelessly this last year to upgrade the facility and begin plant and combustor test rig commissioning for Phase 1 of the Baker Hughes validation campaigns. Thanks to the Baker Hughes team, and thanks to Constellation’s site staff and leadership team that supported us. Together, we manage a set of highly skilled contractors and craft that worked over 140,000 hours to complete these upgrades, all while working safely with no recordable injuries. They installed several new pieces of major equipment, welded over 2,000 feet of stainless steel piping and installed approximately 80 new instruments and over a dozen new valves to improve the facility’s operational flexibility for the upcoming campaigns.

It is worth noting that while the initial validation campaigns are targeted towards Baker Hughes combustion system, NET Power will benefit immensely from the overall plant’s operation. We have incorporated lessons learned from prior testing, not only in the physical facility design, but in the control system and way we collect and utilize our plant data. The additional plant data will allow us to further improve our plant operations and to calibrate our process simulation models that were the original basis of the plant design. Our goal is to develop highly accurate digital twin virtual models of our demonstration plant at La Porte and our utility-scale plants like Project Permian. We can then apply AI machine learning algorithms to the digital twin to help our engineers more rapidly improve our plant design and performance.

Turning to slide 10. The operations team is executing on schedule against our highlighted equipment validation campaigns with Baker Hughes. The first two phases of equipment validation are being conducted in a Baker Hughes combustor test rig, shown on the bottom right of this slide. The test rig was assembled in Baker Hughes Florence, Italy facility and installed in NET Power and La Porte demonstration facility during the third quarter of 2024. We recently commenced commissioning of the first phase of Baker Hughes equipment validation at La Porte on schedule. This first phase will ultimately result in the down selection of the combustor burner that will be used in future validation phases at La Porte as well as Project Permian and beyond. In the past couple of weeks we have been flowing CO2 and oxygen streams through the test rig and dialing in the upgraded plant equipment and controls to ensure the conditions required by Baker Hughes specification are being achieved.

It is great to see the plant operating as intended and embarking on this multi-year campaign. Upon successful completion of Phase 1 testing, we will roll into Phase 2, taking the selected oxy-fuel burner and testing it alongside a combustion liner and other hardware to form a single demonstrator size combustion can. The next slide shows some of the Baker Hughes hardware currently in manufacturing in Florence or at their suppliers’ facilities. As we have mentioned in previous communications, the Baker team is dual tracking the development of the demo scale turboexpander for La Porte and utility-scale turboexpander for Project Permian. The left-hand side of this slide shows some of the demonstrator turboexpander components including a single bucket also known as a Blade, a nozzle segment also known as a [indiscernible] segment, and the casting of their primary outer casing that will house the combustion cans.

On the right-hand side, you can see the utility-scale turboexpander’s external casing, along with a simplified 3D utility-scale turboexpander model. It is great to see hardware in production to meet our Project Permian schedule and demonstrates the concurrent engineering approach that NET Power and Baker Hughes are taking in our turboexpander joint development program. On slide 12, we provide a few updates on Project Permian. We remain on track for initial power generation in the latter half of 2027 to first half of 2028. Yesterday, we announced our selection of Air Liquide as the air separation unit supplier for the Project Permian FEED. Air Liquide has been an outstanding partner for years at La Porte where their adjacent ASU facility supplies us industrial gases and other services.

We are excited to continue our relationship with a company that shares our values of technology innovation and focus on sustainability. Regarding the ASU design, we are progressing the FEED for 2 x 50% configuration for Project Permian. This configuration entails construction of two separate adjacent ASUs, each one delivering approximately 2,000 tons per day of oxygen to meet our total requirements of approximately 4,000 tons of oxygen per day. ASUs of this smaller size are easier to transport to Project Permian and the majority of the sites we anticipate building NET Power plants. It is also a more prevalent size in the industrial gas industry and will allow us to leverage a more robust supply chain as we scale into manufacturing mode in the future.

During Q3, we publicly announced the signing of our third Limited Notice to Proceed with Baker Hughes for a total of approximately $90 million of purchases for long lead materials required to meet schedule for the utility scale turboexpander and related key process equipment. Additionally to preserve our schedule, purchase orders were placed for identified long lead electrical equipment denoted here on this slide. The FEED for Project Permian with Zachry Group remains on schedule to conclude in the fourth quarter of this year, which will include the cost estimate, schedule and overall plant design deliverables for the project. Moving into next year, we plan for Zachry’s engineering team to roll out of the FEED phase and write into continued engineering work with substantially the same team.

This work will include detailed design, value engineering where feasible and not impacting schedule and incorporation of Air Liquide’s ASU FEED into the overall plant EPC contract. We are underway with Zachry preparing the contract and execution plan for the kick-off of the EPC phase and beginning of construction for the second half of 2025. I will now pass it to Akash for the financial updates.

Akash Patel: Thanks, Brian. As mentioned in Brian’s comments, Zachry’s estimating team is hard at work preparing the total cost roll-up for Project Permian which we expect to receive in December. This initial estimate will be subject to review and negotiation prior to the EPC contract being executed. Similar to other market participants, we expect to see continued inflation in capital equipment and construction costs compared to our previously provided guidance of $1.1 billion for Project Permian. Importantly, we also expect this inflation will be offset by the continued improvement in the market price for clean reliable power. We are in active negotiations for Project Permian’s key supply and offtakes and look forward to sharing more information as they are finalized.

Additionally, we continue to work with our existing owner group on the capital formation for Project Permian which we expect to finalize after fee conclusion and supply and offtake agreements. Moving to slide 14. NET Power continues to prudently deploy our capital ending the third quarter of 2024 with approximately $580 million of cash and investments. In the third quarter, our cash flow used in operations was approximately $8 million which included a cash payment of approximately $5 million under the Baker Hughes JDA. As mentioned previously, we expect cash flow used in operations to continue increasing as we build out the organization progress the joint development program with Baker Hughes and ramp up activity at La Porte. For the quarter, our total capital expenditures were approximately $22 million comprised of approximately $10 million of capitalized costs associated with ongoing Project Permian development activities and approximately $13 million spent on La Porte modifications and upgrades ahead of testing.

NET Power’s fully diluted share count was approximately 249 million shares as of September 30. This was comprised of approximately 215 Class A and Class B vested shares, 19.5 million shares issuable upon the exercise of outstanding public and private warrants, which if exercised would give NET Power an additional $225 million of cash, 2.7 million shares subject to earn-outs or vesting requirements and approximately 11.5 million authorized shares issuable pursuant to the joint development agreement with Baker Hughes. For a detailed breakdown of our diluted share count, please refer to our annual and quarterly financials on file with the SEC. That concludes our prepared remarks. I’ll now pass it back to the operator to open up the line for Q&A.

Thanks,

Q&A Session

Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question is coming from the line of Thomas Meric with Janney Montgomery Scott. Please proceed with your questions.

Thomas Meric: Yes. Good morning. Thanks for the time. A couple of questions. I’ll start with kind of integrating multiple NET Power plants on a single site. Just curious if you can walk through both the opportunities for cost savings and just the challenges of integrating multiple plants things like shared control rooms, CO2 export compression, ASU those types of things? And then I have a follow-up on the capital equipment inflation.

Daniel Rice: Yes. Hey, Thomas, this is Danny. Good to have you on today. I think I’ll cover sort of just like the economic proposition and then Brian can cover some of just the technical operational nuances of it. I think as we look at Project Permian the first plant it’s going to be first of a kind the most expensive plant we ever built and it’s going to be a single unit. I think as we look at just getting down the cost down curve the CapEx curve for all future plants those capital improvements are really going to come from a combination of just getting into manufacturing mode and deploying more of these plants, just continuous improvement in iterations from one generation to the next. But we really do see like the largest cost savings in terms of overnight cost of a new — NET Power plant is really going to come from being able to deploy multiple plants together in a fleet configuration.

So I think like the nice thing for us sitting here today is not only is it more economic for us to deploy multiple plants together, but it’s also what the market is looking for in terms of just new load growth. And not just load growth across an entire region, but load growth at a concentrated site where one location could see demand for a gigawatt or a couple of gigawatts of power. And so what we’re really doing now on the origination side is it’s really increased that filter level of the scope and the size of the sites that we’re looking for are becoming a little bit bigger. I think the nice thing for us is we’re starting with such a small footprint. We’re talking about 15 acres for each of these plants. And so we’re really now starting to look for locations, where we have 100 or 200 acres of land, which is not a lot of land I think especially, when you compare it to the other clean alternatives that need a couple of thousand acres.

So we’re talking about being able to have a gigawatt scale sort of fleet deployment on 60 acres. And that’s a pretty incredible set-up for us that allows us to really start looking at a lot of areas and opportunities that I think most other potential solutions aren’t able to look at. So the fleet sort of deployments are really what we’re starting to look at. And I think just kind of part and parcel of that is if we’re looking at just the sequencing of those deployments, what does it look like? And I think I kind of alluded to it with what we’re looking to do up in MISO and we’ll probably do in some of these other regions, which is the first plant or two are going to be going into the grid. The grid needs that power right away. I think a lot of the folks on the data center side, especially because this technology is a new type of gas power generation technology, they’re going to want to have that redundancy on the power but they’re also going to want to see it active in that area.

And so I think just naturally the way you’re going to see it play out is the first batch of plants go on to the grid. That also then starts to become the back-up power for future deployments. And then those future deployments can be co-located behind that meter. So you have the redundancy of the plant going into the grid. You have the co-located power behind the meter. And like we mentioned in the prepared remarks, we’re always going to have that peaking storage capability of the oxygen oxy plus storage. So we’re always able to provide that peaking power back to the grid even when we’re servicing that baseload behind the meter co-located. But maybe I’ll turn it over to Brian a little bit to give you guys some color on how we’re thinking about just the operational side.

Brian Allen: Yes. Thanks, Danny. I think you covered it well. Just a few other points is it’s not always – if you’re doing multiple plants side-by-side, it’s not always necessarily scaling up the equipment. So we would foresee of course, it’s the same turboexpander, it’s the same compressors pumps but there is significant construction savings just for the EPC to do duplicate powertrains. And this plays out in the power industry when you do let’s say, a combined cycle plant and you’re doing multiple turbines that are the same. There’s just significant learnings on the site and spreading of let’s say, your overhead indirect construction costs across a larger facility. So – and then as you said in the question, there are some items that don’t duplicate.

You’re still going to have one control room and one set of water treatment. So there are pure savings by combining multiple plants with the same site. And then in other cases it’s savings on construction doing project-over-project.

Thomas Meric: Thanks Helpful for both of those. And then on the inflation of capital equipment just curious on a couple of things. First is it electrical equipment and broad-based across other components that you need, pipes valves, fittings, et cetera? And then is it – are you seeing it more on manufactured finished products or are you also seeing it on the upstream materials for those goods? And that’s it for me. Thank you.

Danny Rice: Yes, it’s Danny, I’ll take that. I mean right now what we’re getting quotes for directly is the large engineered equipment. So definitely we’re seeing it there. If you look at heat exchangers, turbomachinery, electrical equipment, those are the things that we’ve been either purchasing long leads or getting indicative quotes with our partners. In terms of the bulk all of that will be coming through really the Zachry, FEED. So we anticipate, whether it’s pipes fittings, valves, all the smaller commodities that will come through that FEED estimate. We do anticipate increases but can’t really put an exact number on that at this point.

Brian Allen: Yes. And the only other thing I’d add to that is, we do have a playbook on negotiating for these things. So we have received indicatives. We have still to go through the negotiating process. So there’s more that, we can really say on that point.

Operator: Thank you. Our next question is coming from the line of Betty Jiang with Barclays. Please proceed with your questions.

Betty Jiang: Hi. Good morning. So I want to ask about this oxygen storage opportunity here. One, just help us frame — you talked about one day of extra oxygen storage is equating to I think 1.2 gigawatt hours. Just how much — like how much spare capacity is currently baked into the base power plant design to generate that excess oxygen currently? Or is that a separate design decision that you have to make from the get-go to add in that optionality initially?

Danny Rice: Yeah. Betty thanks for the question. Let me turn it over to Brian, to give you just some of the high-level things. I would say before I do, it really does become a very customizable sort of decision of how much storage do you want to have on-site and how much excess oxygen do you want to be able to produce in order to recharge the battery storage. So it really is going to be on an application-by-application basis. How quickly do you want to recharge. And how quickly do you want to — how much — how many hours or days of storage do you want to have? Brian, any …

Brian Allen: Yeah.

Danny Rice: …nuances you want to add to it?

Brian Allen: Yeah. Sure. So the oxygen storage is inherent, in our cycle. We use gaseous oxygen, but we would store liquid oxygen, as let’s say, back-up. So there always will be some liquid oxygen tank at the site. It’s just a question of how do you size it for the minimum, we would need just for back-up redundancy for start-up and so forth or do you oversize it for the storage mechanism. And that’s why we put a range on the slide that you saw of 10% to 25% of baseload. So as Danny said, we’ll work with each application including on Permian. We’re considering this right now in our FEED, how much we would potentially want to oversize the locks tank. But yeah, it really comes down to, how you would treat a battery? How you would look at the economics and payback of charging and discharging? So it can be oversized. Of course it takes energy to fill it, which would affect your baseload capacity. So this will be something we look at application-by-application.

Betty Jiang: No. That’s helpful. So maybe thinking through the economic side of this solution, would you be thinking about monetizing this separately, one as a single NET Power plant, but the baseload is being monetized separately from the peak power?

Danny Rice: Right. Yeah, Betty, I think if you think about it through the lens of just selling a license to build a NET Power plant from our perspective, the customer is really going to look at what’s the total intrinsic value of the NET Power plant. I think everything that we’ve really been doing internally to-date has really been focused on the baseload power output of this facility. And we really haven’t been trying to ascribe much value to this peaking supplement, which doesn’t eat into the baseload. It’s really just supplemental to it. I think now that we kind of see what’s kind of happening in the market where you’re starting to see these data centers trying to put their power on to these grid systems, you’re starting to see a lot of reluctance and just resistance from a lot of these system operators both on front of the meter, but also on the behind the meter co-located situations.

This sort of peaking capability that we can provide to the grid for their benefit, while at the same time servicing the co-located data center really is a solution where I think everybody gets what they want. The data center gets their 24/7 power, 365 days a year for a set amount of power. And at the same time the grid gets the dispatchable peaking power that it needs to be able to meet its night time power load, really as you look at just the cycling of renewables from daytime to night time. That’s what the grid needs is that sort of dispatchable response power. And so right now I think there’s a little bit of a logjam with what’s happening on the data center side both within the RTOs, but also at FERC where they’re really trying to figure out how are we able to meet this load growth with new generation without compromising just the reliability of the grid system.

So we’re kind of just sitting here today with this inherent solution that’s part of that oxy-combustion process where we’re kind of saying we can do both. We can provide the baseload co-located power that the data centers need, while also at the same time from the same asset meet the peaking capabilities and peaking demand that the grid needs. And so there’s real value there, right? If you can provide peaking power to the grid at higher than just 24-hour round-the-clock prices there’s real value there. And back to Brian’s point in mind earlier on just how quickly you can recharge and dispatch? If that is like a nightly occurrence or if you’re in an area where there’s weather events whether it’s cold winters or hot summers, you can have those seasonal opportunities to be able to capture much, much higher prices.

So there really is a ton of intrinsic value in this oxygen storage peaking capability. But again, it’s going to be customized for each market. But I would say if you look at just like the intrinsic value of this oxygen piece relative to the cost to install oxygen storage tanks, our back of the envelope math suggests this is probably the cheapest form of long duration energy storage granted this energy storage is really in the form of auxiliary load right, because you’re able to turn down your ASU to pick-up where that energy is coming from. But no matter how we slice it this becomes probably the lowest cost long duration energy storage in the world. So it’s a really, really interesting one and it’s something that the market really needs given the struggle to be able to meet both grid demand for reliable power along with being able to meet this 24/7 large load that’s coming down the pike from data centers.

Betty Jiang : Okay. Thank you very much for that color.

Operator: Our next question is coming from the line of Pavel Molchanov with Raymond James. please proceed with your question.

Pavel Molchanov: Yes. Thanks for taking the question. In your prepared remarks, you gave some thoughts kind of post election. I wanted to zoom in specifically on 45Q. Obviously, there will be some conversations in Congress about making changes to the Inflation Reduction Act potentially cutting some of the stuff out of there. Any concerns that 45Q might be on the proverbial chopping block?

Danny Rice : Yes. No, it’s a great question, Pavel, and it’s good to have you on the call with us today. No, not really. I think when we look at all of the things that are eligible for the IRA and what things really kind of become those bipartisan solutions. I would say, carbon capture is probably near the top of that list, because I think if you take a step back and look at what carbon capture enables us to do. One, it’s — we think it’s the most impactful way to be able to decarbonize. And I think if you look at just what NET Power is able to offer just being able to replace every existing coal-fired power plant and carbon emitting natural gas power plant in the United States with a NET Power plant you’ve eliminated total CO2 emissions from U.S. power generation.

And that is the largest source of emissions in the United States is from power generation. So it is the most impactful thing to be able to decarbonize. And so that’s certainly one thing that pleases certainly, one side of the aisle more than the other. But I think more importantly, especially within this new administration, NET Power is a unique technology in that it actually leverages fossil fuels. And I think, if you look at everything that Trump has been advocating for it’s increasing fossil fuel development, in order to be able to lower energy prices to consumers. And so NET Power, it’s a natural gas-fired power plant. So we actually use that feedstock to our benefit. And certainly, within the 45Q, it’s not just using natural gas, but it’s developing new wells using the natural gas and the oil industry to be able to do that work for us.

And so, carbon capture really is a tool that’s predicated on the success and the skills of the fossil fuel industry. So, I would say, if there’s really anything within the IRA that makes it through completely unscathed, it’s going to be carbon capture for all the reasons that I just mentioned. And then, obviously, the other thing that would be really, really nice to see is an administration that actually supports the 45Q for EOR. Right now, there’s a $60 per ton 45Q credit. If you use the CO2 for EOR, does that go higher to be able to encourage and incentivize even greater oil production? Possibly. It’s certainly not our focus area. Our focus area is, Class VI permanent geologic sequestration. But I think, as we’re being able to demonstrate with Project Permian in West Texas, there is a ton of economic and industrial value for being able to take that CO2 and use it in a really derisked way and enhance oil recovery applications.

So, that’s what we’re doing on Project Permian to be able to derisk and catalyze our commercialization. And again, that plays right into the skill set and experience of the fossil industry that has allowed the US, to get to where it is today as an economic superpower. So we hope to see the 45Q continue for something like NET Power. And again, we think if anything makes it through completely unscathed, we think it will be something like carbon capture.

Q – Pavel Molchanov: Appreciate that. I guess, in that same context, I’m sure there are kind of back-up plans, Plan B for all eventualities. So maybe talk about the kinds of conversations, you’re having outside of North America? What kind of the international opportunity set looks like?

Danny Rice: Yes. I would say, our primary effort, especially, because we’re really focused on the origination, front origination really is focused around North America. And the reason is fairly simple. North America is the market, where these plants probably have the highest intrinsic value, and it’s a function of access to the lowest cost natural gas in the world, access to great CO2 sequestration potential where there is tangible value in the form of the carbon incentives from the programs like the 45Q or from a carbon tax like you have up in Alberta Canada. And so, North America is just a place where these plants have not just like the highest intrinsic value, but it’s also like just the largest markets for us to be able to scale and go after.

So, North America, is certainly our priority. But as we look at some of these other markets around the world, that are really interesting to us, Australia is starting to pick-up steam, in terms of interest over there. Southeast Asia, is a little bit interesting. I think the bigger challenge there right now, is really figuring out where are they going to get access to really low-cost natural gas, and what are they going to do on the sequestration side. And so as the market just continues to mature, we’re really going to be focused on scaling up here in the United States. And then as we’ve mentioned before, conversations in the Middle East are progressing. The Middle East is an interesting place just because they really do have some of the lowest cost gas on the planet and they do have major power ambitions that just continue to scale.

The biggest thing over there is there going to be an incentive on the sequestration side that you can get paid for the sequestration rather than just allowing the free market to put a price on or a value on it. So these other markets are interesting. Europe just needs to get its Energy Act together altogether. But as they do that it will certainly — I think it will certainly lead people to see that solutions like NET Power are going to be the lowest cost 24/7 clean power solution. It’s just taking a lot of these countries a little bit more time to be able to get there really to be able to compete with the economics of projects here in the United States and Canada. So we’re focused we think in the absolute right markets the absolute biggest markets.

And it’s nice that this US-based technology is going to be not just commercialized here in the US but it’s going to be scaled here in the US and Canada really for the benefit of global deployments further down the line.

Pavel Molchanov: Thanks very much.

Danny Rice: Thanks, Pavel.

Operator: [Operator Instructions] I’m not showing any further questions. Sorry about that. Our next question is coming from the line of Noel Parks with Tuohy Brothers. Please proceed with your question.

Noel Parks: Hi. Good morning.

Danny Rice: Hi, Noel.

Noel Parks: Just a couple of things. One I was wondering about you mentioned that — or one thing I’ve been thinking about is, of the various types of partnerships that you already have in place and some of them extending to additional regions, is there any value in direct partnership with gas infrastructure or pipeline players? Because I’m assuming there are some sites with pretty ready access to the gas supply that you’d need others where upgrades or expansions might be necessary. So just wondering if that fit into the picture where you are now.

Danny Rice: Yes, it totally does. I think when we create that picture of like all of the potential strategic stakeholders that need to come together or that would want to come together as part of these NET Power hubs, certainly, like the gas supply piece is a big one, right? I think one of the interesting things that you’re seeing in the space is the folks that do a lot of the gas transportation whether it’s through existing long-haul interstate pipelines or just the regional gathering systems in some of these basins where we’re looking to deploy these plants a lot of those midstream companies are now starting to figure out, I have a tangential skill set in providing CO2 transportation and sequestration. So a lot of the conversations that we’re having with folks on the gas supply that happen to have just that regional presence.

They’re also looking at how can we twin these lines with the CO2 line, because it’s a skill set they have with being able to construct and operate gas transportation facilities and CO2 is not terribly different. So the conversations that we’re having with folks on the gas supply side, I would say in many of those instances, we’re also having similar conversations with them about being able to provide the transportation and sequestration of the CO2 as well. So, it’s that dual skill set that they provide just to be able to do both. And it just becomes another way for them to be able to create value alongside us within some of these hubs. Does that make sense?

Noel Parks: It does. It’s really interesting. Is there the potential for any of those to sort of provide capital for those — for example for twining the lines or is it more of an arm’s length sort of vendor situation they would be looking to do?

Brian Allen: No, I think they will be more strategic with constructing new assets, upgrading — increasing the capacity of certain assets.

Danny Rice: And I think that’s just one of like the beauties of NET Power is, our plants will be able to increase new demand for natural gas in certain areas that can justify increasing the size of the gas pipeline, while at the same time justifying and being able to underwrite the construction of a CO2 line just given the volumes that we’re talking about coming from our plants. I mean, it’s a lot of CO2 that we’re capturing, nearly 900,000 tons for each of these plants. And so, if you’re talking — if we’re talking about a fleet configuration of 4 to 10 NET Power plants, you’re talking about 3.5 million to 9 million tons of CO2 per year. And 3.5 million to 9 million tons of CO2 per year, you can justify building a 200 to 500 mile pipeline, which is a really, really big pipeline.

Obviously, if we do it right, we’re putting these plants right on top of the sink. We’re really not going to have to build that much CO2 infrastructure. But as we talked about deploying NET Power plants across like the Southeast of the United States, where there’s no great place to store the CO2, you’re going to have to build a CO2 pipeline to be able to get that CO2 either back to the Gulf Coast or to the Midwest. And so you’re going to need volume to be able to underwrite those investments. And so, NET Power is going to be one of those solutions that’s going to be able to help catalyze new infrastructure to be able to decarbonize some of these areas that may not be right on top of these geologic sinks. So, I think it does become very strategic and collaborative between us and the gas infrastructure players.

They certainly want to see increased demand for natural gas. And we can provide not only that, but we could provide another revenue line for them which is the CO2 transport and sequestration on the back end of the plant, so really, really strategic and symbiotic sort of relationship between us and the gas infrastructure players.

Noel Parks: Thanks. Its great to hear. That’s all I had.

Operator: Thank you. I’m showing no further questions at this time. I’d now like to hand the call back over to Danny Rice for any closing comments.

Danny Rice: Okay. Thank you everybody for joining us today. We’re busy at work. We’re excited with this testing that we’re starting with Baker right now. A lot of things coming on the pike. The open book estimate from Zachry will be coming back later this year. So I look forward to get back with you in the beginning of next year to provide additional updates on our path towards commercialization of this one of a kind technology that we think will be coming to market way before anything else. So, we have our heads down just focused on executing this plan, commercializing this technology and changing the world. So, appreciate your support, appreciate your participation and we will chat soon. Thank you.

Operator: Thank you. This does conclude today’s teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.