Q4 2023 Net Power LLC Earnings Call
Okay.
Operator: Greetings and welcome to Net Power Incorporated's fourth quarter and year-end 2023 earnings conference call. This time, all participants are in listen-only mode.
Greetings and welcome to the net power Incorporated's fourth quarter and year end 2023 earnings conference call.
At this time, all participants are in listen only mode.
Operator: The question and answer session will follow the formal presentation. If anyone should require operator assistance during today's conference, please press star zero from your telephone keypad. As a reminder, this conference is being recorded. At this time, I'll turn the conference over to Bryce Mendes, Director of Investor Relations. Mr. Mendes, you may now begin your presentation.
A question and answer session will follow the formal presentation.
If anyone should require operator assistance during todays conference. Please press star zero from your telephone keypad.
As a reminder, this conference is being recorded.
At this time I'll turn the conference over to price Mendez Director of Investor Relations you May now begin your presentation.
Bryce Mendes: Good morning, everyone, and welcome to Net Power's fourth quarter and year-end 2023 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 fourth quarter of the year-end 2023, 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.
Good morning, everyone and welcome to net hours fourth quarter and year end 2023 earnings conference call.
With me on the call today, we have our Chief Executive Officer, Danny Rice, our President and Chief operating Officer Bryan Allen.
Financial Officer a hospital.
Yesterday, we issued our earnings release for the fourth quarter and year end 2023, which can be found on our Investor Relations website, along with this presentation the IR.
Uh huh.
During this call our remarks and responses to questions may include forward looking statements.
Actual results may differ materially from those stated or implied that forging statements due to risks and uncertainties associated with our business.
Bryce Mendes: These risks and uncertainties are discussed in our SEC file. Please note that we assume no obligation to update any forward-looking statements. With that said, I'll now pass this over to Daniel Rice, Net Power's Chief Executive Officer. Thanks, Bryce. Hi, everyone.
These risks and uncertainties are discussed in our SEC filings. Please note that we assume no obligation to update any forward looking statements.
I'll now pass over to Dani Reiss Pires, Chief Executive Officer.
Thanks, Chris Hi, everyone and thanks for joining us today.
Daniel Joseph Rice: Thanks for joining us today. I'll provide some thoughts on the encouraging macro setup for NetPower and how it plays into our three-pillar corporate strategy. I'll recap the 2023 highlights, and I'll share what's in store for 2024. And then I'll hand it over to Brian and Akash for operational financial updates. Starting with the macro, we continue to see very positive signals that future load profiles will require more low-carbon generation for two distinct but related applications. First generation that can load follow to balance intermittent renewables while, in other instances, serving as 24-7 clean, reliable power for baseload, industrial, and behind-the-meter applications.
Provide some thoughts on the encouraging macro setup for net power and how it plays into our three pillar corporate strategy I'll recap 2023 highlights and I'll share what's in store for 'twenty 'twenty, four and then I'll hand, it over to Brian in a cash for operational financial updates.
Starting with the macro we continue to see very positive signals that future loan profiles for require more low carbon generation correct two distinct but related applications first generation that can load followed to balance intermittent renewables while in other instances.
Moving out 24, seven clean reliable power for Baseload industrial and behind the meter applications well. It makes net power very attractive is that our power plan is designed to serve both of these growing markets and because of low cost natural gas feedstock to our patented process. We believe net power plants will be the lowest cost option to do.
Daniel Joseph Rice: What makes Net Power very attractive is that our power plant is designed to serve both of these growing markets. And because low-cost natural gas is a feedstock to our patented process, we believe net power plants will be the lowest cost option to do so for both. Anecdotally, our first plant, Project Permian, which will inevitably and unsurprisingly be the most expensive plant we ever build, is expected to have a lower levelized cost per kilowatt hour than new nuclear, new geothermal, and new hydro. And as we move from Project Permian to SN2 and into full-scale manufacturing mode, we'll expect to quickly begin moving down the CAPEX curve On the topic of reliable generation, one fairly nascent segment that has gotten the market's attention lately is data centers, and hyperscale data centers in particular, given the robust load projections for AI.
So for both.
Anecdotally, our first plant project, Permian, which will inevitably and unsurprisingly be domestic expensive plant. We ever built is expected to have a lower level of life cost per kilowatt hour than new nuclear new geothermal and new hydro and as we move from project Permian to S. N. Two went into full scale manufacturer.
Mode, we'll expect to quickly begin moving down to Capex carpet and really begin to differentiate net powers affordability from other forms of reliable clean generation.
On the topic of reliable generation.
One fairly nascent segment that has gotten the market's attention lately its data centers and Hyperscale data centers in particular, given the robust load projections for AI. These datacenters are hungry for power. They are expected to become one of the largest segments for load growth in the U S through 'twenty, three and beyond and.
Daniel Joseph Rice: These data centers are hungry for power, and they're expected to become one of the largest segments for load growth in the U.S. through 2030 and beyond. And because our Net Power plants are designed to deliver low-cost, low-carbon intensity, 24-7 reliable power, we think our product will be the best fit amongst options for this category. Similar to how we assess all market opportunities, it begins with mapping out where these plants make good sense. The mapping criteria for these bright spots are unique.
Because our net power plants are designed to deliver low cost low carbon intensity 24, seven and reliable power.
Our product will be the best fit amongst options for this category.
How we assess all market opportunities it begins with mapping out where these plants make good sense. The mapping criteria for these bright spots unique the mapping layers are existing and planned fiber geology for sequestration ambient temperatures to ensure efficient data center cooling needs and access to natural gas one of the criteria that's a nice to.
Daniel Joseph Rice: The mapping layers are existing in plant fiber, geology for sequestration, ambient temperatures to ensure efficient data center cooling needs, and access to natural gas. One of the criteria that's nice to have but not a need to have is proximity to power transmission lines. Given the 24-7 dispatchability we're designing for our plants, we expect we can go off-grid and put these data centers where they're best suited. This layered map creates quite a number of interesting bright spots across North America for future Net Power Plants for this segment. Interestingly, no modifications would be required for our plants.
But not a need to have is proximity to power transmission lines.
Given the 24 seven dispatch ability, we're designing for our plants. We expect we can go off grid and put these data centers, where they're best suited.
Layered map creates quite a number of interesting bright spots across North America for future net power plants for the segment.
Interestingly no modifications would be required for our plant.
Daniel Joseph Rice: The initial size we're bringing to market with Generation 1 will target roughly 250 megawatts, so we can see perfect pairing of Net Power plants with a single hyperscale data center. And as you see these data centers becoming larger, up to 750 to 1,000 megawatts, it really lends itself to Net Power's modular design in order to deploy fleets of three to four Net Power plants to match each data center's load. The reason why I mentioned this market is it really reinforces the importance of our three-pillared strategy. First, prove this technology at utility scale. We think the world needs net power like no other technology, and the sooner we can prove it, the sooner the world can begin implementing a better pathway to energize and decarbonize.
Exercise, we're bringing to market with generation one won't be targeting roughly 250 megawatts. So we can see perfect pairing of net power plants with a single Hyperscale data center and as you see these data centers, becoming larger up to 750 to 1000 megawatts. It really lends itself to net cars modular design in order to deploy fleets of three to four net.
Power plants to match each data center slowed.
The reason why I mentioned this market is it really reinforces the importance of our three pillar strategy.
Proving this technology of utility scale, we think the world needs not power like no other technology in the sooner we can prove it sooner the world can begin implementing a better pathway to energize and decarbonize.
Daniel Joseph Rice: Second, build the supply chain to quickly scale deployments in manufacturing mode. Because we have such an enviable patent portfolio around our process, it's really only Net Power that can generate low-cost, clean power for the variety of applications we're pursuing, which means we need to be prepared to deploy our plants at meaningful scale to meet the needs of not just the data center industry but utilities to meet the baseload and load-following needs of the grid today. And as Brian will touch on in a bit, we're ensuring that the partners we choose today have the ability to scale with future demand. And the third pillar is to build a backlog of projects to fully activate the supply chain strategy.
Second build the supply chain to quickly scale deployments in manufacturing mode. Because we have such an enviable patent portfolio around a process. It's really only net power that can generate low cost clean power for the variety of applications, we're pursuing which means we need to be prepared to deploy our plants at meaningful scale to meet the needs of not just the data center.
Street, but utilities to meet the Baseload and load following need the grid today and as Brian will touch on in a bit we're ensuring the partners. We pick today have the ability to scale with future demand in the third pillar is to build the backlog of projects to fully activate the supply chain strategy and we're going to use our origination strategy to catalyze early adopters of net power plant.
Daniel Joseph Rice: And we're going to use our origination strategy to catalyze early adopters of Net Power plants, bringing in strategic partners to these projects to accelerate their learning in order to accelerate their own licensed deployments across their targeted operating areas. We're making good progress on our first originated project, OP1, and are actively working on several others, all while advancing discussions with prospective customers across Canada, the US, the Middle East, Australia, and Europe for deployments beyond serial number one. Recapping the past year for a minute, 23 was a pivotal year for Net Power.
Bring in strategic partners to these projects to accelerate their learning in order to accelerate their own license deployments across their targeted operating areas on.
On this last point.
We're making good progress on our first originated project O P. One and are actively working on several others, all while advancing discussions with prospective customers across Canada. The U S. The middle East, Australia, and Europe for deployment beyond serial number one.
<unk> in the past you for a minute 23 was a pivotal one for net power, we raised significant capital through our public listing which will allow us to develop and improve our technology utility scale. We commenced the feed programs. Prior Christy utility scale plant, which can be located on oxy has tightened west, Texas, We added lummus technology.
Daniel Joseph Rice: We raised significant capital through our public listing, which will allow us to develop and improve our technology utility scale. We commenced the feed program for our first utility scale plant, which will be located on the Oxyhosted site in West Texas. We added LEMIS technology to fulfill our recuperative heat exchanger supply chain strategy, and we announced development on our first originating project, which will be located in the MISO region. All of these accomplishments are stepping stones towards deploying net power plants at mass scale by the next decade. In 2024, we have a few key milestones to highlight. First and foremost, we plan to begin the first of four phases of combustor and turbo expander equipment validation at LaPorte. In a few moments, Brian will provide additional color on these testing campaigns and why they're so important to validating the equipment and expected performance of SN1 at Project Permian. Second, we expect to complete the feed of Project Permian, and we'll begin to form the Project Strategic Owner Group. As a reminder, Net Power considered various federal programs to supplement the funding for SN1, including the DOE grant program. DOE announced the recipients of the grant in December, which didn't include Project Permian.
Phil I recuperative heat exchanger supply chain strategy.
We announced development and our first original named project, which can be located in the MISO region.
All of these accomplishments are stepping stone towards deploying net power plants at mass scale by next decade.
'twenty 'twenty four we have a few key milestones to highlight first.
First and foremost we plan to begin the first of four phases of combustor in turbo expander equipment validation at the port.
A few moments Brian will provide additional color on these testing campaigns and why they're so important to validating the equipment and expected performance of S. N. One at project Permian.
Second we expect to complete feed a project Permian and will begin to form that project's strategic on the group as a reminder.
That power considered various federal programs to supplement the funding pressed on one including the Doa Grant program do you we announced the recipients of the grant in December which didn't include project Permian. It's important to note that the Golar project Permian, it's deploy our technology utility scale with safe reliable operations and the D. We grant would've required clastic sequestration.
Daniel Joseph Rice: It's important to note that the goal of Project Permian is to deploy our technology utility scale with safe, reliable operations. And the DOE grant would have required Class 6 sequestration, which, due to the specific geology in West Texas, adds off-take risk and materially increases sequestration costs to the project. When we first announced Project Permanent in 2022, our plan was for Net Power and the Strategic Growner Group to fund our first project. This remains the plan, and we expect to announce more details regarding the funding strategy later this year. Our third 2024 expected milestone is to finalize and announce our long-term strategic partner for the Air Separation Unit, or ASU, one of the critical components of our cycle. And finally, we'll continue to advance additional Net Power origination projects.
Due to the specific geology in west, Texas at uptake rescue materially increase of sequestration cost to the project. When we first announced project Permian in 2022 are playing with Barnett power and the strategic on the group to fund. Our first project. This remains the plan and we expect to announce more details regarding the funding strategy later this year.
Our third in 2020 four expected milestone is to finalize and announce our long term strategic partner for the air separation unit or a S. You're one of the critical components of our cycle and finally, well continue to advance additional net power origination projects. This include submitting our application for interconnect and class six wells at O P. One and moving.
Daniel Joseph Rice: This includes submitting our application for InterConnect and Class VI wells at OP-1 and moving a couple of other origination projects along in order to talk about those locations more publicly. So as we wrap up our first calendar year as a public company, our thesis for Net Power is playing out faster than expected. The world needs clean, affordable, and reliable power.
Couple of other origination projects along in order to talk about those locations more publicly.
So as we wrap up our first calendar year as a public company. Our thesis for net power is playing out faster than expected the world needs clean affordable and reliable power and in my mind that powers, the only solution that actually adequately checks each of those boxes.
Daniel Joseph Rice: And in my mind, Net Power is the only solution that adequately checks each of those boxes. Because of our patent portfolio around the cycle, we're the only ones who can do it. And so we've got to do it right, and we've got to be ready to do it at scale. I couldn't be more excited for what's to come as we continue to develop and deploy technology the world desperately needs. So with that, I'll hand it over to Brian for operation. Thanks, Danny.
Because of the patent portfolio around the cycle, we're the only ones who can do it.
And so we've got to do it right.
We've got to be ready to do it at scale.
I couldn't be more excited for what's to come as we continue to develop and deploy technology. The world desperately needs so with that I'll hand, it over to Brian for operational update.
Thanks Danny.
Brian Allen: The team continues to make steady progress developing Project Permian and our Net Power technology. On slide 8, we highlight several key milestones completed in the last few months, as well as milestones we plan to achieve in 2024. For Project Permian, in the fourth quarter of 2023, we signed our Limited Notice to Proceed, or LNTP, with Baker Hughes for the release of long-lead material for the utility-scale turbo expansion. Issuing LMTP for the primary turbo machinery of a power project is one of the key critical paths of the overall project schedule, and it allows Baker Hughes to release orders to its major material sub-suppliers in support of our schedule. More recently, we initiated engineering work with our selected ASU provider and executed our land lease agreement with Oxy for our plant site in West Texas.
The team continues to make steady progress developing project Permian and our net power technology on.
On slide eight we highlight several key milestones completed in the last few months as well as milestones we plan to achieve in 'twenty 'twenty four.
For project Permian in the fourth quarter of 2023, we signed our limited notice to proceed or L. N C. P with Baker Hughes for the release of long lead material for the utility scale Turbo expander.
Issuing LNG P for the primary turbo machinery of a power project is one of the key critical paths of the overall project schedule and it allows Baker Hughes to release orders to its major material sub suppliers in support of our schedule.
More recently, we initiated engineering work with our selected a S or your provider and executed our land lease agreement with Oxy for a plant site in West Texas.
Brian Allen: These achievements allow us to remain on schedule for the project, with initial power generation expected to occur in the second half of 2027 to the first half of 2028. As Danny mentioned, this year we expect to complete Project Permian Feed and form the project consortium. This year, we will also negotiate key supply and off-take contracts and solidify our financing strategy with our strategic partners and owners. It's important to note that Net Power's capital will be the first dollars into the project, ensuring long leads are secured at the appropriate time to maintain the schedule ahead of additional capital commitments by our consortium partners. We will order additional long-lead components, including the recuperative heat exchanger and major electrical equipment, throughout 2024. As it relates to technology development, in the fourth quarter, we signed our strategic supplier agreement with Lummis Technology, which designates Lemus as the recuperative heat exchanger supplier for Net Power utility-scale plants. I will touch more on this agreement and its significant implications for Net Power in a few slides. This year, we will develop our initial standard plant process design package.
His achievements allow us to remain on schedule for the project with initial power generation expected to occur in the second half of 'twenty seven through the first half of 2028.
As Danny mentioned this year, we expect to complete project Permian seed and have formed a project consortium.
This year, we will also negotiate key supply and offtake contracts and solidify our financing strategy with our strategic partners that doctors.
It's important to note that not powers capital will be the $1st into the project.
Soaring long leads are secured at the appropriate time to maintain schedule ahead of additional capital commitments by our consortium partners.
We were order additional long lead components, including the recuperative heat exchanger and major electrical equipment throughout 2024.
As it relates to the technology development in the fourth quarter, we signed our strategic supplier agreement with Lummus technology.
Which doesn't nate's lummus as ever Cooper to heat exchanger supplier for net power utility scale plants.
I will touch more on this agreement and its significant implications for net power in a few slides.
This year, we will develop our initial standard plant process design package.
<unk> licensing deliverable that supports future projects seeds in a manner that maximizes standardization and drives down plant capital cost. We also intend to secure a long term strategic supplier agreement with our identified a S. Your provider, which we view as one of the most important next steps and standing up our long term supply chain for the May.
Brian Allen: A key licensing deliverable that supports future project feeds in a manner that maximizes standardization and drives down plant capital costs. We also intend to secure a long-term strategic supplier agreement with our identified ASU provider, which we view as one of the most important next steps in standing up our long-term supply chain for the major license components of our cycle. On slide nine, the validation campaigns at Laporte will follow Baker Hughes' established new product introduction and risk mitigation strategy. Whereas our previous report testing from 2018 to 2022 was primarily focused on proving our proprietary oxy-combustion supercritical CO2 cycle, this upcoming testing will primarily focus on validating and de-risking the Baker Hughes Utility Scale Turbo Expander and how to optimize its operation within our cycle.
Your license components of our cycle.
On slide nine the validation campaigns that report will follow Baker Hughes establish new product introduction and risk mitigation strategies.
Whereas our previous La Porte testing from 2018 to 2022 was primarily focused on improving our proprietary oxy combustion supercritical C. O. Two cycle. This upcoming testing will primarily focus on validating and Derisking. The Baker Hughes utility scale turbo expander and how to optimize its operation within our cycle.
Yeah.
The ultimate purpose of the demonstration plant and demonstrate our campaign is to stimulate the nearest conditions possible that the utility scale Turbo expander, we'll see it project Permian.
Brian Allen: The ultimate purpose of the demonstration plant and demonstrator campaign is to simulate the nearest conditions possible that the utility-scale turbo expander will see at project permit. Therefore, the demonstrator turbo expander design, architecture, technology, and material selections all seek to replicate as closely as possible the behavior and environment of the utility-scale turbo expander. Equipment validation will follow four primary phases and will continue through 2026. The first phase of testing at Laporte focuses on the turbo expander's burner, which is where combustion of natural gas and oxygen take place in a CO2 environment. We will test multiple oxy-fuel burner configurations, and Baker will select the best burner heading into the next phase. The second phase of testing will take the down-selected oxy-fuel burner from phase one and test it alongside a combustion liner and other hardware to form a single demonstrator-sized combustor can. The combustor can's purpose is to deliver a high-pressure and high-temperature mixture of CO2 and water to power the expander.
Therefore, the demonstrator turbo expander design architecture technology and material selections all seek to replicate as closely as possible that behavior and environment of the utility scale Turbo expander.
Equipment validation will fall of four primary phases and will continue through 2020 six.
Okay.
The first phase of testing that report focuses on the turbo Expanders burner, which is where combustion of natural gas and oxygen take place you know C O two environment.
We're testing multiple oxy fueled burner configurations, and Baker will select the best burner heading into the next days.
The second phase of testing will take the down selected oxy fuel burner from phase, one and tested alongside with a combustion liner and other hardware to form a single demonstrator size combustor cat.
The combustor cans purpose is to deliver the high pressure and high temperature mixture of SER, two and water to power the expander.
This testing will allow us to optimize their combustion unfold laporte demonstration conditions.
Brian Allen: This testing will allow us to optimize the combustion in full-report demonstration conditions. The third phase of testing will involve scaling the demonstrator-sized combustor can from Phase 2 to a utility-scale can with clusters of burners, and then testing it with the goal of learning and optimizing the design of the utility-scale combustor that will operate at Project Permian. The fourth and final phase will test the full demonstrator turbo expander, including the validation of materials and design architecture used on the turbo expander for Project Permian. Baker Hughes and Net Power will use this testing to tune their analytic and performance simulation models with the acquired test data. We will confirm the demonstrator turbo expander and overall cycle operability and dynamic capability. All of this will allow us to confirm the overall demonstration plant cycle design and plant control system integrated with the Baker Hughes equipment, ensuring that we can minimize residual first-of-a-kind risk prior to the initial operation of Project Permian. Turning to slide 10, our Strategic Supplier Agreement signed with Lamas Mars, a significant achievement for the continued development of the net power cycle. As I mentioned before, Lummus is the designated recuperative heat exchanger supplier for Net Power. Not only do they have an extensive track record of delivering heat exchangers globally,
The third phase of testing will involve scaling the demonstrator size combustor can from phase two to two utility scale can with clusters of burners, and then testing it with a goal of learning and to optimize the design of the utility scale combustor that well operated project Permian.
The fourth and final phase will test a full demonstrator turbo expander, including the validation of materials and design architecture used on the turbo expander for project Permian.
Baker Hughes in that power will use this testing to tune our analytics and performance simulation models with the acquired test data.
We will confirm the demonstrator turbo expander in overall cycle Operability and dynamic capability.
All of this will allow us to confirm the overall demonstration plant cycle design and plant control system integrated with the Baker Hughes equipment.
Ensuring that we can minimize residual first of a kind risk prior to the project Permian initial operations.
Turning to slide 10, our strategic supplier agreement signed with longer Smart a significant achievement for the continued development isn't enough power cycle.
As I mentioned before la misses their designated Recuperative heat exchanger supplier for new power.
Not only do they have an extensive track record of delivering heat exchangers globally.
Brian Allen: But their 110 plus years of experience in licensing technologies for numerous process industries makes them the ideal partner for NetPower. Lummus has a long history of supporting NetPower technology with an unmatched understanding of the NetPower heat exchanger requirements. As a system integrator, Lummus will leverage its best-in-class global supply chain of heat exchanger component manufacturers to design and manufacture the most optimal performing and lowest total cost recuperative heat exchanger network for our sites. They will also be proactively ramping up their capacity to meet future demands in that power plant. This partnership further expands our competitive and IP moats. Net Power will own all cycle, process, and controls IP developed.
But there are 110 plus years of experience in licensing technologies for numerous process industries makes them the ideal partner for new power.
Mr has a long history of supporting that power technology with an unmatched understanding of then that powers heat exchanger requirements.
As a system integrator lummus will leverage its best in class global supply chain, it's heat exchanger component manufacturers to design and manufacture the most optimal performing and lowest total cost recuperative heat exchanger network for our cycle.
It will also be proactively ramping up their capacity to meet future demands in that power plants.
This partnership further expands our competitors or 19 months that power will own all cycle processing controls IP developed.
Brian Allen: And we can only sell this proprietary recuperative heat exchanger to Net Power licensees. Net Power will also benefit from receiving licensing revenue on Bumus' future sales into Net Power, as is customary for specialty licensed equipment in the process industry. This agreement is a fantastic partnership for us, and we're excited to work with Leon and his team at Lemon. Slide 11 provides an all-encompassing view of our strategic supply chain partnerships that have been formed for the main components of our cycle. As previously mentioned, we have initiated engineering work with our selected air separation unit provider for Project Permian.
That's kind of hold myself as proprietary recuperative heat exchanger to our licensees.
That power will also benefit from receiving licensing revenue by Mrs. Future sales into net power plants as is customary for specialty license to equipment and the process industry.
This agreement is a fantastic partnership for Us and we're excited to work with Leon and his team at Lummus.
Slide 11 provides an all encompassing view of our strategic supply chain partnerships that have been formed for the main components of our cycle.
As previously mentioned, we have initiated engineering work with our selected air separation unit provider for project Permian.
Brian Allen: We will look to form a long-term strategic supplier partnership with them this year and announce more details at that time. Another area of focus this year will be establishing our control systems division. As we evaluate each supplier partnership, we look for win-win opportunities to leverage our partners' most advanced technologies and to further enhance our competitive position and IP moat. So far, we have been able to find best-in-class partners that are aligned with our vision of delivering clean, affordable, and reliable energy, and importantly, to do so at manufacturing scale. With that, I'll pass it off to Akash for the financial update. Thanks, Brian. Turning to slide 13, Net Power ended the fourth quarter of 2023 with a strong balance sheet, including approximately $637 million of cash in short-term investments.
We'll look to form a long term strategic supplier partnership with them this year and announce more details at that time.
Another area of focus this year will be establishing our control systems Park.
As we evaluate each supplier partnership we look for win win opportunities to leverage our partners most advanced technologies and to further enhance our competitive position and I T Mo.
So far we have been able to find best in class partners that are aligned with our vision of delivering clean affordable and reliable energy and importantly to do so at manufacturing scale.
With that I'll pass it off to our costs for the financial updates.
Thanks, Brian.
Turning to slide 13, net power ended the fourth quarter of 2023, with a strong balance sheet, including approximately $637 million of cash and short term investments.
Brian Allen: For the quarter, our total capital expenditures were approximately $8 million, comprised of approximately $5 million in capitalized costs associated with the ongoing Project Permian Development activities and approximately $3 million spent at Lepore on modifications and upgrades ahead of testing, which is expected to begin this year. Under the current interest rate environment, we continue to benefit from putting our balance sheet cash to work to materially offset our corporate spend. In the fourth quarter, our cash flow used in operations was approximately $3 million.
For the quarter, our total capital expenditures were approximately $8 million comprised of approximately $5 million capitalized costs associated with the ongoing project development activities and approximately 3 million spend at the port of modifications and upgrades ahead of testing, which is expected to begin this year.
Under the current interest rate environment, we continued to benefit from putting our balance sheet cash to work to materially offset our corporate spend.
In the fourth quarter, our cash flow used in operations was approximately $3 million.
As mentioned last quarter, we expect cash flow used in operations to continue increasing as we build out our organization progressing joint development program with Baker Hughes and ramp up activity at the port.
Akash Patel: As mentioned last quarter, we expect cash flow use and operations to continue increasing as we build out our organization, progress the joint development program with Baker's Use, and ramp up activity out of the port. Moving to the right slide of slide 13, we show an illustrative use of existing capital through the end of 2027 when we expect initial power generation for our first utility-scale project. Of the approximately $637 million on the balance sheet, we expect earmarking approximately $200 million for our equity contribution to Project Permian, approximately $175 million for the CAPEX and OPEX at LaPorte, as well as the Baker Hughes Joint Development Agreement, and approximately $265 million towards corporate G&A, origination work, and other expenditures. Net Power's full-duty share count was approximately 247 million shares as of December 31, 2023 This is comprised of approximately $212 million in Class A and Class B vested shares currently outstanding, and $19.5 million shares issuable upon the exercise of outstanding public and private warrants, which would give Net Power an additional $225 million in cash.
Moving to the right side of Slide 13, we show in our less shouldn't use of existing capital through the end of 2020, when we expect initial power generation for our first utility scale project.
The approximately $637 million on balance sheet.
Expect earmarking approximately 294, our equity contribution to project Permian.
Plus $175 million for the Capex and Opex at La Porte as long as Baker Hughes Joint development agreement.
And approximately $265 million towards corporate G&A origination work and other expenditures.
<unk> fully diluted share count was approximately 247 million shares as of December 31, 2023.
It was comprised of approximately 212 million class, a and class B vested shares currently outstanding.
$19 5 million shares issued upon the exercise of outstanding public and private warrants, which were getting that found an additional $225 million in cash.
One 6 million shares subject you earn outs of vesting requirements and approximately 14 million authorized shares issuable pursuant to the joint development agreement with Baker Hughes for.
For a detailed breakdown of our diluted share count. Please refer to notes 10, and 11 of our 10-K.
Akash Patel: 1.6 million shares subject to earnouts or vesting requirements and approximately 14 million authorized shares issued both pursuant to the Joint Development Agreement with Faith Review. For a detailed breakdown of our diluted share count, please refer to notes 10 and 11 of our 10-K. That concludes our prepared remarks. I'll now pass it back to the operator to open up the line for Q&A. Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question at this time, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue.
That concludes our prepared remarks, I'll now pass it back to the operator to open up the lines for Q&A.
Thank you.
We'll now be conducting a question and answer session.
I'd like to ask a question at this time, Please press star one from your telephone keypad.
A confirmation tone will indicate your line is in the question queue.
Press Star two if he like to remove your question from the queue.
For participants using speaker equipment may be necessary to pick up your handset before pressing the star keys.
One moment. Please we poll for questions. Thank you.
Thank you and our first question will be coming from the line of Noel parks with.
Tuohy Brothers. Please proceed with your questions.
Hi, good morning.
Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Thank you. I think you and our first question will be coming from the line of Noel Parks with... Tui Brothers. Please proceed with your question.
Just how do I know.
Oh.
Hi, just a couple I wanted to.
Run by you.
Well when you were talking about you got different phases of testing I think in the fourth one there was some mention of.
Yeah with the Turbo expander.
You'll use that process to it.
Sort of.
Daniel Joseph Rice: When you were talking about the different phases of testing, I think in the fourth one, there was a mention of... with the TurboExpander, that you'll use that process to sort of confirm your analytics that you and Baker Hughes will be using. I was wondering, when you talk about analytics for that stage of evaluation, are those proprietary metrics you are going to have to build, or are they just more sort of standardized benchmarks you'll be using? Yeah, no, this is Danny.
Confirm your analytics are that the U N.
Baker Hughes will be using I was wondering when you talk about the politics for that that stage of evaluation are those.
Terry.
You you are going to have to build or are they just more sort of standardized benchmarks you'll be using.
Yeah.
Yeah. No. This is this is danny.
Daniel Joseph Rice: So the question is really around the configuration and the design of the components. Is that right? Uh, yeah, yeah. Yeah, no, these are these are these are these are these are these are custom built Baker components. But I'm going to turn it over to Brian to give you some of the technical details of the component. Sure. Yeah, thanks, Danny. Yeah, no, well, so the analytical tools definitely are proprietary to ourselves in the cycle design and to Baker and their various tool sets on how they design compressors, expanders, turbines, etc.
So the question is really around like the configuration and the design of the components. It is that right.
Alright, yes, yes.
Yeah, no there isn't.
These are these are accustomed bill Baker compounding.
But I'm going to turn it over to Brian to give you some of the technical details.
<unk>.
Yeah.
Sure Yeah. Thanks, Danny.
Yeah, no well so the analytical tools definitely are proprietary to.
So ourselves in the cycle design and two Baker in their various tool sets on how they design.
Oppressors expanders turbines et cetera.
Brian Allen: So with any model or any simulation, right, you're making some assumptions. So just, I'd say, typical engineering good practice, as you get data, you always go back to your analytics and simulations and verify them or update them. And as you talked a good bit about the steps involved in securing the supply chain and, I was also thinking about with the Lemus relationship, I wouldn't expect you necessarily to get into details, but does LUMNUS have incentives for adhering to your schedule or timetable, and I'm just curious if you could generally characterize what those would be like, just your ability to manage that. Sure. Yeah, I can take that, Danny. Yeah, they absolutely do.
So with any model or any simulation right, you're making some assumptions. So just I'd say typical engineering. Good practice as you get data you always go back to your.
Analytics, and simulations and verify them or update them.
Great. Thanks for the clarification.
Hum.
And as you you you've talked a good bit about the.
Are the steps involved in securing the supply chain and.
I was also thinking about with the lummus relationship.
Is I would've thought you guys started to get into details but it.
I must have incentives for adhering to your schedule or timetable I was just curious if you could just generally characterize what what those would be like just I guess are you or your ability to manage that.
Okay.
Sure Yeah, I can take that Danny.
Yeah, they absolutely do I mean, the strategic supply agreement really aligns our incentives together, there's a incentive for them to pursue a cost down reduction program with us there's incentives to build out the capacity required to ramp up into manufacturing mode.
Brian Allen: I mean, this strategic supply agreement really aligns our incentives together. There's an incentive for them to pursue a cost-down reduction program with us. There are incentives to build out the capacity required to ramp up into manufacturing mode. There are incentives to standardize. So, it really aligns with our three pillars, which any supply agreement, that's really what we're trying to do is not optimize just for one order, Project Permian, but to build out real alignment through all three pillars with these partners. Great, just what I was wondering.
There's incentives to standardize so it really aligns with our three pillars, which any supply agreement. That's really what we're trying to do is not optimized just for one order project Permian, but to build out a really alignment through all three pillars with with these partners.
Great that's what I was wondering.
Operator: As a reminder, if you'd like to ask a question today, you may press star 1 on your telephone keypad. Our next question is from the line of Thomas Merrick with Johnny Montgomery Scott. Good morning, everyone.
Thank you so much.
If you ask a question today, you May press star one from your telephone keypad.
Our next question is from the line of Thomas <unk> with Janney Montgomery Scott. Please proceed with your questions.
Hey, good morning, everyone. Dan you mentioned the power plants as an option for data center power I'm curious about unpacking that a little bit more mainly just curious on how you think or how we should think about the challenges and the opportunities for this kind of power offtake, specifically with respect.
Daniel Joseph Rice: Dan, you mentioned Net Power plants as an option for data center power, and I'm curious about unpacking that a little bit more. Mainly just curious about how you think, or how we should think about the challenges and the opportunities for this kind of power offtake, specifically with respect to CO2 infrastructure build out and sequestration opportunities. Yeah, no, certainly.
To see it to the infrastructure build out and sequestration opportunities.
Yeah, No certainly I mean like I mentioned in the prepared remarks, I mean, putting putting these clinton in the right location. It is the first piece and so.
Daniel Joseph Rice: I mean, like I mentioned in the prepared remarks, putting these points in the right location is the first piece. And so, again, it starts with the geology. It starts with mapping it out. I think, you know, when most people think of data centers and hyperscale data centers, they only really think of data center alley in Virginia, just because that's where the largest concentration is. But if you look across just across the United States broadly, I mean, data centers are everywhere.
Again, it starts with the geology it starts with mapping it out I think when most people think of data centers and Hyperscale data centers. They they they they only really think of data center Alley in Virginia.
Just because that's where the largest concentration is but if you look at just across the United States broadly.
I mean data centers, they're everywhere.
Daniel Joseph Rice: You know, there's more data centers, I think, in Texas at this point than there are in that West Virginia DC metroplex area. And the reason for that is that's where population trends are going. That's where data demand for AI and photons are going. And so, when you actually start to map all this stuff out and you map out where is there data center demand for future deployment, and where there is natural gas infrastructure on getting access to that gas and you map out just the subsurface piece, it really starts to illuminate some really interesting areas that I think, you know, most people aren't totally appreciative, like the northern MISO region from Illinois, Indiana, Ohio into Kentucky, West Virginia, you know, I would say why couldn't West Virginia become data center alley version 2.0 with even lower cost natural gas and lower cost power that's lower carbon intensity than what's in Virginia right now if you could put net power there.
As more data centers I think in Texas at this point in there on that West Virginia D C Metroplex area.
And the reason for that is that's where population trends are growing that's where data demand for AI.
In photons are going and so when you're actually starting to map all of this stuff out and you map out where is their data center demand for future deployment.
And where there is natural gas infrastructure on getting access to that gas and you map out just the subsurface piece.
It really starts to eliminate some some really interesting areas that I think.
Most people aren't totally appreciative like the northern MISO region from Illinois, Indiana, Ohio, and Kentucky.
West Virginia, you know I would say why why Couldnt West Virginia become data Center Ali version, two point now with even lower cost natural gas and lower cost power, that's lower carbon intensity than with the Virginia right now if you could put in that power there.
Daniel Joseph Rice: So these are sort of like paradigm-shifting opportunities where it really opens up the landscape for where you can start to establish even lower carbon intensity, lower costing power for these data centers. And it just so happens that the design that the team wanted to bring to market in terms of the size of this net power plant, the first utility scale one, really, really correlates fairly well with the power load for these data centers. So we think it will be a really good match made in heaven, you know, conversations with a lot of the big tech guys that have been going on over the course of the last few years at early stages. But I think, you know, just like why we thought it was so important to put net power in the public spotlight for potential customers, it's to ensure that they understand this pathway that net power creates before they commit to a much higher cost, much less reliable option. And so, you know, we're designing this plant for reliability, we're designing this plant for affordability, and inherent to that cycle is 100%, almost 100% capture of that CO2. So, from just a responsibility and sustainability perspective, Net Power is going to, we think, be the top choice for a lot of these potential applications. Thanks for that; it's super helpful.
So these are all like sort of a paradigm shifting opportunities where it really opens up the landscape for where you can start to establish even lower carbon intensity lower costing a power for these data centers and it just so happens that you know the the design that the team wanted to bring to market in terms of the size of it.
That power plant first utility scale, one you know really really correlates fairly well with the power load.
For these data centers. So we think it'll be a really good match made and having conversations with a lot of the big Tech guys that have been going on over the course of the last few years and in early stages.
But I think you know just just like why we thought it was so important to kind of putting that power in the public spotlight for the utility potential customers to ensure that they understand this pathway that net power creates before they commit to a much higher cost much less.
A less reliable option and so you know we're designing this plant for reliability, where we're designing this plant for affordability and an inherent to that cycle is 100% almost 100% capture of that C. O. Two so we think from just a responsibility and sustainability perspective.
Net net power is going to we we think that the top choice for a lot of these potential applications.
Thank you that's super helpful. Brian on the strategic partners. He went into great detail on walnuts and heat exchanger. So I won't ask for any more from that but how do I think about that in terms of a control system partner and just what should I or investors look for over the next couple quarters.
Brian Allen: Brian, on the strategic partners, you went into good detail on limits in the heat exchanger, so I won't ask for any more on that, but how do I think about that in terms of a control system partner? And just what should I or investors look for over the next couple of quarters?
<unk>.
Okay.
Brian Allen: Sure. Well, on that one, it is really critical, but it's not a long lead. That's similar to, let's say, the heat exchanger or the turbo machinery.
Sure well on that one it's not it is really critical but it's not a long lead at similar to let's say the heat exchanger or a turbo machinery. So we have a little time to get this right.
Brian Allen: So we have a little time to get this right, but what we'll look for is, again, a partner aligned with our three-pillar strategy. And if you think about the net power process, what we're really doing is bringing together a best-in-class combination of equipment that all have to work together in unison. So really, the control system, called The Code, on how you operate this plant is really some of our key technology development and IP. And we developed that as a report, but it will be modified and enhanced as we go to Project Permian. So we'll be looking for a partner similar to the others that we can have repeatable scaling with that respects our IP, that wants to grow with us, and we'll focus on cost reduction programs, all the key elements that we want to embed in the other partnerships. Perfect. That's it for me.
But what we will look for is again, our partner aligned with our three pillar strategy.
And if you think about the net power process.
What we're really doing is bringing together best in class combination of equipment that all have to work together in unison, so really the control system.
The code on how you operate this plant is really some of our key technology development and and IP and we developed at the Port.
But it won't be modified and enhanced as we go across the Permian. So we will be looking for a partner similar to the others that we can have repeatable scaling with that respects, our IP that wants to grow with us.
<unk> will focus on cost reduction programs all all the key elements that we want to embed in the other partnerships.
Perfect. That's it for me Thank you all.
Operator: Thank you. Our next question is from the line of Wade Suki with Capital One. Yeah, good morning, everyone.
Okay.
Thank you.
Our next question is from the line of wait Sue heat with capital. One. Please proceed with your questions.
Yeah. Good morning, everyone. Thank you for taking my question I'm, just wondering if you might be able to give us a little more detail or color to the extent you feel comfortable on.
Wade Anthony Suki: Thank you for taking my question. Just wondering if you might be able to give us a little more detail or color to the extent you feel comfortable on the commercial pipeline, geographies, etc. I hate to put you in the geographies or type of customers. Any additional color would be great if you don't mind.
The commercial pipeline.
Geography.
That puts your geographies or type of customers are any additional color would be great. If you don't mind.
Daniel Joseph Rice: Yeah, Wade, I think, you know, as we kind of said in like the opening remarks, you know, the primary application for net power is power to the grid, CO2 gets permanently sequestered in the geology, and that right now is the biggest market for us, and a lot of it happens to be in a lot of just the regulated power markets, you know, MISO, PJM, ERCOT, KAISO, Alberta, the Middle East, and so that's obviously the primary market, that's really where we're focusing a lot of the origination efforts, that's where we're starting to see just a lot of inbounds, and I think that's really just because that's where the geology is very conducive to sequestering the CO2 where it's been proven. I mean, that sequestration piece is not just the entirety of the environmental proposition of a net power plant, but in places like the U.S. where you get that 45Q, it's a huge, huge part of the economic proposition too, and in some of those places, you know, you can actually make more money on sequestering the CO2 than you do on generating 24-7 clean power, so those conversations continue to pick up.
Yeah, I think you know as we can.
I sit in the opening remarks.
The primary application for net powered power to the grid.
To get permanently.
Question in the geology.
And in that right now is the biggest market for us.
And in a lot of it happened to be in a lot of just the regulated power markets.
So PJM ERCOT Kai so Alberta, the middle East.
And so that that's obviously the primary market, that's where really where we're focusing a lot of the origination efforts.
We're starting to see just a lot of inbounds and and I think that's really just because that's where the geology is very conducive to sequestering the cotwo it's been proven.
That sequestration pieces. It is not just the entirety of the environmental proposition of a net power plant, but in places like the U S, where you get that 45 Q.
It's a huge huge part of the economic proposition to earn in and in some of those places you know you can actually make more money on sequestering the cotwo need deal on generating 27 clean power.
So those conversations continue to pick up I would say like the one the one thing that has been surprising as you know.
Daniel Joseph Rice: I would say, like, the one thing that has been surprising is that, you know, a lot of countries, a lot of companies have come out and committed to these net zero ambitions without really doing the calculus to figure out what that pathway to actually get there is, and so we're starting to have more and more conversations with potential customers who are coming to us saying, all right, we've done the math, and it just doesn't pencil out trying It doesn't pencil out with some of these other options without causing a doubling or tripling of the power prices that I would have to charge my customers, and that's just not tenable, and so now people are saying, "How soon are you guys going to be able to scale up into manufacturing mode?", so it's really good feedback that we're getting from the market.
I think you know a lot of a lot of countries a lot of companies have come out and commit to these net zero ambitions without really doing the calculus to figure out what is that pathway to actually get there and so we're starting to have more and more conversations with potential customers, who are who are coming to us, saying alright, we've done the math and it just doesn't pencil out trying to get.
They were just renewables alone it doesn't pencil out with some of these other options without causing a doubling or tripling of the power prices that I would have to charge my my customers and that's just not tenable and so now people are saying how soon that you guys can be able to scale up into manufacturing mode. So it's it's it's really good feedback that we're getting from the market at its par.
Daniel Joseph Rice: It's part of, like, the whole thesis of us taking NetPower public in the first place was eventually the market's going to come to this realization that there's no solutions out there that can ensure affordable, reliable, clean power at the scale that the world needs, and unfortunately, I think the world's already committed to this lower carbon future without really having those solutions in hand to get them there on that pathway, and so NetPower is creating that pathway, and so I think as we think about how can we help our potential future customers, a lot of what Project Permian allows us to do is start to bring strategic partners into Project Permian to get their feet wet, to get them up that learning curve on the NetPower plant so that they're comfortable to deploy it across their primary geographic territories. Same with the origination strategy. The origination strategy for us isn't because we want to become an independent power producer.
Of like the whole thesis of us taking that power public in the first place was eventually the market is going to come to this realization that there's no solutions out there that can ensure affordable reliable clean power at the scale that the world needs and Unfortunately, I think the world is already committed to this lower carbon future without really having those solutions in hand to get them there in that.
Pathway and so net power is creating that pathway until I think as we think about how can we help our potential future customers a lot of what project Permian allows us to do is start to bring strategic partners at your project Permian to get their feet wet to get them up that learning curve on the net power plant so that they're comfortable they deploy it across their primary geographic.
The territories.
With the origination strategy the origination strategy crushed isn't because we wanted to become an independent power producer, we wanted to be able to create a pathway to bring in prospective future customers.
Daniel Joseph Rice: We want to be able to create a pathway to bring in prospective future customers to participate, to operate, and really learn the NetPower plant so that they're super, super comfortable deploying across their primary areas also, so as we really think about our commercial strategy, it's about creating pathways to global license deployments in the 2030s and beyond, and so we're starting to have conversations with those customers that are interested in licenses, that are really interested in being able to come into our early projects to really dip their toe in the water and really understand how to run these plants. So the origination piece is just going to be a catalyst to those long-term license opportunities, and so we're seeing it both in the US, we're seeing it across the world, and I think with things like data centers, you're starting to see entirely new markets pop up that have the opportunity to be a major, major source of load for power demand, both here in the United States and other parts of the world. Fantastic.
To page to operate and really learn the net power plant, so that they're super super comfortable deploying across their primary areas all of a sudden so as we really think about our commercial strategy, it's about creating pathways to global license deployments into 'twenty and beyond and so we're starting to have conversations with those customers that are interested in licenses.
So they're really interested in being able to come into our early projects to really dip their toe in the water and really understand how to run these plants, though the origination piece of it's just going to be a catalyst to those long term license opportunities and so we're seeing it both in the U S. We're seeing it across the World then and I think you know with with things like data centers, you're starting to see entire.
New markets pop up that have the opportunity to be a major a major source of load for for power demand are both here in the United States in other parts of the world.
Fantastic. Thank you not to put you on the spot here.
Daniel Joseph Rice: Thank you. Not to put you on the spot here, but would your expectation be that, you know, within a couple of years of Project Permian coming online, we might have SN2 or OP2 coming online shortly thereafter, somewhere in that timeline? Is that a fair way to think about it?
Would your expectation be that you know.
Within a couple of years of project Permian coming online we might have S. N two or O P. Two coming online shortly thereafter or somewhere in that time line is that a fair way to think about it.
Daniel Joseph Rice: Yeah, that's right. I think the way we're looking at all of these origination projects is because we do have the benefit of time, because, you know, the first plant will be coming online mid-27, end of 27, beginning of 28, that range there. We're really figuring out now where we want SN2 to be, you know, the second utility-scale plant. So with OP1, that project that we announced, will be in the MISO region. We're going to be filing our interconnect application there. I think that the MISO window opens next week, and it'll be open for 30 days.
Yeah, that's right I think the way we're looking at all of these origination projects because we do have the benefit of time.
Because you know the first time will be coming online mid 27% to 27, beginning of 28 that range there.
Figuring out now where do we want to send two to be the second utility scale plant.
Oh P. One that that project that we announced you know well will be in the MISO region, we're gonna be filing our interconnect application there I think that might stay a window opens next.
Next week and it'll be up in 30 days and so we will get our interconnect application in there during that window, we're working on our classics Paramount without partner up there.
Daniel Joseph Rice: And so we'll get our interconnect application in there during that window. We're working on our class six permits with our partner up there. And so we're going to be in a place where we have all the permits in hand to do power to the grid, and sequestration to the ground. Well in advance of that plant, if we said we wanted it to be SN2, it's going to be in a position to be SN2. I think the determination of if it is SN2 or if it's SN3 or SN4 is really a function of other really economic, more strategic projects that could leapfrog it and become SN2.
And so we're going to be in a place where we're gonna have all permits in hand to do power to the grid sequestration to the ground.
Well in advance of of.
That plant if we said we want it to be a S. N. Two it's going to be in a position to b to B S N too I think.
The determination of if it is that thing to work with that send three Rs in Florida is really a function of other other really economic more strategic projects.
Projects that could leapfrog and become S. N. Two so what are you really going to be seeing from us doing over the next few years with the origination but also with license opportunities. It's just continuing to build up the backlog of projects and we'll be able to test a lot them. According to their importance to the net power strategy.
Daniel Joseph Rice: So what you're really going to be seeing us do over the next few years with origination, but also with licensed opportunities, is just continuing to build up this backlog of projects, and we'll be able to slot them according to their importance to the net power strategy into the long-term proposition for the shareholder. Fantastic. Thank you so much.
Into the long term proposition for the shareholders.
Fantastic. Thank you so much appreciate it.
Daniel Joseph Rice: I appreciate it. Yep. Thanks, Wade.
Yes, Thanks, Mike.
Operator: Thank you. As a reminder, if you'd like to ask a question today, you may press star 1 on your telephone keypad. Our next question comes from the line of Betty Zhang with Barclays. Please proceed with your question. Good morning.
As a reminder, if you'd like to ask a question today you May press star one from your telephone keypad.
Our next question is coming from the line of Betty Jang with Barclays. Please proceed with your questions.
Good morning.
Brian Allen: I have a question for Brian, wondering if you could provide a bit more color around how you think about the risk profile for each of the validation phases at Laporte on site 9. Just trying to understand, basically, are phases 1 and 2 just testing the equipment designed by Baker, and like what are the most important pieces that need to get de-risked? And then also, once you've proven the operation at the demonstration scale, is it relatively less risky to scale it up to the utility scale?
A question for Brian.
I was wondering if you could provide a bit.
More color around how you think about the risk profile for each of the validation phases I left part on slide nine.
Just trying to understand basically it's phase one and two just testing the equipment designed by Baker.
And like what are the most important pieces that needs to get dressed and then also once you've <unk>.
Moving to operations at the demonstration scale is it relatively less risky to scale without two utility scale. Thanks.
Brian Allen: Thanks. Sure, thanks for the question. So the phases are sequenced in order with each phase of testing, validating, and retiring key technical risks, which are shown on the slide. So in this way, there's no specific test that, let's say, is the highest risk, but they're building upon each other.
Yeah.
Sure. Thanks for the question.
So you know that the.
The phases are sequence in order with each base.
Testing validating and retiring key technical risks, which are shown on the slide.
This way there's no specific test, let's say, that's the highest risk, but they're building upon each other.
Brian Allen: So they're all important, I guess to say. A reminder that we're developing the utility scale, or Baker is developing the utility scale turbo expander in parallel. So really, this is about validation, um, Yeah, both happening completely in parallel. I don't know if I answered your question fully, but... I would say that all the phases are important.
So they're all important [laughter] I guess to say it.
Binder that we're developing to utility scale bakers developing utility scale turbo expander in parallel.
So really this is about validation.
Yeah.
Yeah, both happened in completely in parallel.
I don't know if I answered your question fully but.
I would say that the all the phases are important they all build on each other each one retire certain risks where certain results that Baker is looking to see and each one builds and order from there.
Brian Allen: They all build on each other. Each one takes certain risks or certain results that Baker is looking to see, and each one builds in order from there. So the demonstration equipment is actually what's currently in the plant right now. So the plant, yeah, the plant was built, exists, it's there, and we are making modifications to it that are specific to the Baker Hughes Turbo Expander and the testing for the combustors. So Baker's equipment will be shipping in this year and in the future years to basically be placed where the prior turbo standard was located. About it with the baker.
Got it so the demonstration equipment is actually.
Oh, what's currently on the plant right now.
So the plant the plant was built existed there we are making modifications to it that are specific to the Baker Hughes a turbo expander.
And the testing for the can busters.
So baker's equipment.
<unk> will be shipping in this year and overdose.
The future years to basically be placed where the prior kober Turbo standard was located.
Got it.
111 with the bakers.
Brian Allen: Will the turbo extender be arriving on site, and won't it get connected to the plant? Yeah, that'll be in the 2026 timeframe. So between now and then, we're doing combustor testing, which is a major component of the turbo expander. So again, what we're doing is really, yeah, we're demonstrating the combustion system, both at the demonstrator size, which happens in Phase 2, and at the utility scale combustor size. So, in essence, before we start Project Permian, we will have already operated the full utility-sized canister at LaPorte.
Turbo expander be arriving on site connect.
Connect it to the plant.
Yes, that'll be in the 2026 timeframe. So between now and then we're doing a combustor testing, which is a major component of the turbo expander.
So again, what we're doing is really yet.
We're demonstrating the combustion system.
Both for the demonstrator size whats happens in phase two and the utility scale combustor size.
So in essence before we start project Permian, we will have already operated with full utility side can have a court.
Brian Allen: OK. Got it. Understandable. And a follow-up on the licensing fee, just the licensing fee that's related to Luminous, is it incremental to the fees that you originally laid out for the NetPowerCycle technology? And if so, just how material is it relative to the other fees?
Okay.
Got it understood.
And a follow up on the license and Pete just on the licensing fee that's related to luminous is it incremental to the fees that you'll have originally laid out for the net power cycled technology and if so just how material is it relatively.
Brian Allen: Yeah, I can take that, but Akash, it is additive, right? But as we said before, we're going to go through a price for each license we sell, right? Well, it can be predicated upon plant economics, right?
Yeah, I can take that up any potash.
Yeah.
It is additive right.
Said before.
We're going to go through a pricing for each license, we sell right. It's all going to be predicated upon plant economics.
Brian Allen: If you see a plant that is earning 20 plus percent returns, once we come down the capex curve, we should be charging more for a license. So, the license fee for constructing and operating the Net Power plant will be done on an individual project-by-project basis. As far as the alumnus and any other equipment licensing fees, it's too early for us to go out and say what that number is going to be, but it is a fraction, I'd say, of what our plant license is, and it's really formulaic to incentivize them to come down the cost curve and share in the benefit of that. So, it's a little too early for us to say what that number is, given we haven't placed an order yet for any third-party heat exchangers, but there is a formulaic way of us approaching what that equipment licensing fee will be.
D C. A plant that is earning 20 plus percent returns once you come down the capex curve should be charging more for a license.
So it really is.
The the <unk>.
License fee for operating constructing and operating in a power plant.
We'll be done.
On an individual project by project basis.
As far as the Lumpiness in any other equipment licensing fees.
Too early for us to go out and say what that number is going to be put into use.
It's a fraction of what our plant licenses and its really formulaic too to incentivize them to come down the cost curve and share in the benefit of that so a little too early for us to say what that number is given we haven't placed an order yet for any third party game changers, but.
There is a formulaic way of us approaching with that equipment licensing deal will be.
Brian Allen: Got it. No, that's clear. Thanks for the color, Thank you. Thank you. At this time, we've reached the end of our question and answer session, and I'll turn the floor back to Daniel Rice for closing remarks. Thanks, everybody, for joining us today. I'm really excited to share this update with you. Share the key 2024 milestones. You know, really in the foreground for the next few years, we're really focused on steady progress through COD on serial number one, which continues to stay on schedule. And really, you know, as we talked about in the prepared remarks and in some of the Q&A, you know, in the background, we're seeing significant step changes in market sentiment and total addressable market that really set us up for long-term success. So it's critically important that we do it right with serial number one, and doing so really unlocks what we think is going to be one of the largest, most valuable total addressable markets for any company in So we have huge expectations for us, and this team is up to the challenge.
Got it no that's clear thank you for all the color. Thank you.
Yeah.
Thank you.
At this time, we've reached the end of our question and answer session now I'll turn the floor back to Daniel Rice for closing remarks.
Yeah.
Thanks, everybody for joining us today are really excited to share this update with you.
Sure. The key 2024 milestones you know really in and in the foreground for the next few years. So we're really focused on steady progress through T. O D. On serial number one which continues to stay on schedule and really you know as we talked about in the prepared remarks and some of the Q&A.
In the background, where we're seeing significant step changes in market sentiment and the total addressable market that really set us up for long term success. So it's critically important we do it right with Sarah and number one in doing so really unlock what we think is going to be one of the largest most valuable total addressable markets are.
So really any any company in the world today so.
Huge expectations for us and this team is up to the challenge and we are deeply appreciative of your support on this mission to deliver the energy Trifecta I have a good day.
Daniel Joseph Rice: And we are deeply appreciative of your support on this mission to deliver the energy trifecta. Have a good day. Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
Thank you. This will conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.
Okay.