Q3 2024 NET Power Inc Earnings Call
Speaker Change: Greetings and welcome to the NetPower third quarter 2024 earnings call. At this time all participants are in a listen-only mode. The question and answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance, please press star zero on your telephone keypad. 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 NetPower'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.
Bryce Mendes: 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.
Bryce Mendes: During this call, our remarks and responses to questions may include forward-looking statements.
These risks and uncertainties are discussed in our SEC filings.
Bryce Mendes: Please note that we assume no obligation to update any forward-looking statements.
Speaker Change: With that, I'll now pass it over to Danny Rice, NET Power's Chief Executive Officer.
Good morning, everybody, and thanks for joining us.
Speaker Change: 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.
Speaker Change: We continue to focus our efforts on developing, improving our technology at the utility scale, which starts with Baker Hughes's validation testing at our Laporte facility.
Speaker Change: We recently kicked off Phase 1 of our Equipment Validation Program with Baker at LaPorte, which will result in the dump selection of the OxyFuel burner.
Speaker Change: 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.
Speaker Change: We celebrate this milestone as it marks a critical step towards developing, improving our technology at the utility scale, and we look forward to progressing through our outlined four-phase testing program at LaPorte with Baker Hughes now through 2026.
Speaker Change: 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.
Speaker Change: The Air Separation Unit represents one of the major equipment components of a 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.
Speaker Change: Shifting gears, we held an Investor Day in early September where we outlined a recent market study conducted in collaboration with Boston Consulting Group.
Speaker Change: In summary, the opportunity set for 24-7 low-carbon energy is immense, and our targeted North American competitive markets of MISO, ERCOT, PJM, KISO, and ASO, we view the serviceable opportunities as high as 2,000 net power plants.
Speaker Change: 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.
Speaker Change: In our view, by leveraging clean, cheap, and abundant natural gas, NetPower presents
Speaker Change: 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.
Speaker Change: On the market front, we continue to believe the world will be short clean baseload power, and NetPower will be well positioned to be the first to market with a proven and scalable clean power solution.
Speaker Change: We've seen a handful of announcements lately from tech firms with early-stage nuclear companies.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: So the data center complex always receives its 24-7 power, and the grid receives the peaking power of our oxygen-based storage.
Speaker Change: 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 to 80 megawatts, so we're talking extremely large energy storage potential, which we think can be far more economical than traditional battery storage.
Speaker Change: 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.
Speaker Change: Additionally, we'll have a small oxygen storage at Project Permian to help validate this application.
Speaker Change: While the future clean energy mix will certainly require multiple technologies, it's a good time to reiterate what NetPower 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 and conditions.
Speaker Change: Getting our first utility-scale plant financed and operational with safe, reliable operations will change the world and catalyze our future fleet deployments.
Speaker Change: 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.
Speaker Change: 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 2 to 20 net power plants.
Speaker Change: At our first originating project in northern MISO, OP-1, we continue to support the MISO interconnect process and are progressing through the STITON permitting phase.
Speaker Change: 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.
Speaker Change: We're in a region that we believe could have total CO2 storage capacity for a dozen or more net power plants.
Speaker Change: 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,
in favorable industry and regulatory environments that support economic growth.
Speaker Change: Back in the U.S., 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.
Speaker Change: 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.
Speaker Change: Quick reaction to the election, to the U.S. 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.
Speaker Change: 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 LaPorte 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 one of the Baker Hughes validation campaigns.
Brian Allen: Thanks to the Baker Hughes team and thanks to Constellation site staff and leadership team that supported us.
Brian Allen: 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 reportable injuries.
Brian Allen: 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.
Brian Allen: It is worth noting that while the initial validation campaigns are targeted towards Baker Hughes Combustion Systems,
NetPower will benefit immensely from the overall plant operation.
Brian Allen: 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.
Brian Allen: Our goal is to develop highly accurate digital twin virtual models of our demonstration plant at LaPorte 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.
Brian Allen: Turning to slide 10, the operations team is executing on schedule against our highlighted equipment validation campaigns with Baker Utes.
Brian Allen: 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 at NetPowers of the Port Demonstration Facility during the third quarter of 2024.
Brian Allen: We recently commenced commissioning of the first phase of Baker Hughes Equipment Validation at LaPorte 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 LaPorte as well as Project Permian and beyond.
Brian Allen: In the past couple of weeks, we have been flowing CO2 and oxidant 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.
Brian Allen: It is great to see the plant operating as intended and embarking on this multi-year campaign.
Brian Allen: Upon successful completion of Phase I testing, we will roll into Phase II, taking the selected oxyfuel burner and testing it alongside a combustion liner and other hardware to form a single demonstrator-sized combustion can.
Brian Allen: The next slide shows some of the Baker Hughes hardware currently in manufacturing in Florence or at their supplier's facilities.
Brian Allen: As we have mentioned in previous communications, the Baker team is dual-tracking the development of the demo-scale turbo expander for the port and utility-scale turbo expander for Project Permian.
Brian Allen: The left-hand side of this slide shows some of the demonstrator turbo expander components, including a single bucket, also known as a blade, a nozzle segment, also known as a vane segment, and the casting of their primary outer casing that will house the combustion cans.
Brian Allen: On the right hand side you can see the utility scale turbo expander's external casing along with a simplified 3D utility scale turbo expander model.
Brian Allen: 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.
Brian Allen: 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 LaPorte, where their adjacent ASU facility supplies us industrial gases and other services.
Brian Allen: We are excited to continue our relationship with a company that shares our values of technology innovation and focus on sustainability.
Brian Allen: Regarding the ASU design, we are progressing the feed for a two by 50% configuration for Project Permian.
Brian Allen: 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.
Brian Allen: ASUs of this smaller size are easier to transport to Project Permian and the majority of the sites we anticipate building net power plants.
Brian Allen: 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.
Thanks for watching!
Brian Allen: 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 turbo expander and related key process equipment.
Brian Allen: Additionally, to preserve our schedule, purchase orders were placed for identified long-lead electrical equipment denoted here on this slide.
Brian Allen: The feed for Project Permian with Zachary 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.
Brian Allen: Moving into next year, we plan for Zachary's engineering team to roll out of the feed phase and right into continued engineering work with substantially the same team.
Brian Allen: 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.
Brian Allen: We are underway with Zachary preparing the contract and execution plan for the kickoff of the EPC phase and beginning of construction for the second half of 2025.
Speaker Change: I will now pass it to Akash for the financial updates.
Thanks, Brian.
Akash Patel: As mentioned in Brian's comments, Zachary's estimating team is hard at work preparing the total cost rollout for Project Permian, which we expect to receive in December.
Akash Patel: This initial estimate will be subject to review and negotiation prior to the EPC contract being executed.
Akash Patel: Importantly, we also expect this inflation will be offset by the continued improvement in the market price for clean, reliable power.
Akash Patel: Additionally, we continue to work with our resisting owner group on the capital formation for Project Permian, which we expect to finalize after fee conclusion and supply and offtake agreements.
Akash Patel: Moving to slide 14, NetPower continues to prudently deploy our capital, ending the third quarter of 2024 with approximately $580 million of cash and investments.
Akash Patel: 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.
Akash Patel: As mentioned previously, we expect cash flow use and operations to continue increasing as we build out the organization, progress the joint development program with Baker Hughes, and ramp up activity at Laporte.
Akash Patel: For the quarter, our total capital expenditures were approximately $22 million, comprised of approximately $10 million of capitalized costs associated with ongoing project permit development activities, and approximately $13 million spent on report modifications and upgrades out of testing.
Akash Patel: NetPower's fully diluted share count was approximately 249 million shares as of September 30th.
Akash Patel: 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 NetPower an additional $225 million of cash.
Akash Patel: 2.7 million shares subject to earnouts or vesting requirements and approximately 11.5 million authorized shares issuable pursuant to the joint development agreement with Baker Hughes.
Akash Patel: For a detailed breakdown of our diluted share count, please refer to our annual and quarterly financials on file with the SEC.
Speaker Change: That concludes our prepared remarks. I'll now pass it back to the operator to open up the line for Q&A. Thanks.
Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your questions.
Speaker Change: Our first questions come from the line of Thomas Merrick with Jannie Montgomery Scott. Please proceed with your questions
Yeah, good morning. Thanks for the time.
Speaker Change: A couple of questions. I'll start with integrating multiple net power plants on a single site.
Speaker Change: 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.
Speaker Change: Hey Thomas, this is Danny. Good to have you on today.
I think...
Speaker Change: You know, I'll cover sort of just like the economic proposition and then Brian can cover some of just the technical operational nuances of it.
Speaker Change: I think, you know, as we look at Project Pyramid in the first plan, you know, it's going to be...
Speaker Change: 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...
Speaker Change: getting down the cost down curve, the CapEx curve for all future plants.
Speaker Change: Those capital improvements are really going to come from a combination of just getting into manufacturing mode and deploying more of these plants.
Speaker Change: just continuous improvement in iterations from one generation to the next.
Speaker Change: But we really do see like the largest cost savings in terms of, you know, 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.
Speaker Change: I think like the nice thing for us sitting here today is...
Speaker Change: You know, not only is it more economic for us to deploy multiple planes together, but it's also what the market's looking for in terms of just new load growth.
Speaker Change: 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 gigawatts of power.
Speaker Change: I think the nice thing for us is we're starting with such a small footprint.
Speaker Change: You know, we're talking about 15 acres for each of these plants.
Speaker Change: And so, we're really now starting to look for locations where we have...
Speaker Change: you know, 100 or 200 acres of land, which is not a lot of land, I think, especially when you compare it to the other clean and alternatives that need a couple thousand acres.
Speaker Change: So, you know, we're talking about being able to have a gigawatt scale sort of fleet deployment on 60 acres.
Speaker Change: And that's a pretty incredible setup for us that allows us to really start looking at, you know, a lot of areas and opportunities that I think most other potential solutions aren't able to look at.
So
Speaker Change: 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...
Speaker Change: If you'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.
Speaker Change: and we'll probably do in some of these other regions, which is...
Speaker Change: The first plan or two are going to be going into the grid. The grid needs that power right away. I think a lot of the folks in the data center side, especially because this technology is a new type of gas power generation technology.
Speaker Change: 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 onto the grid.
Speaker Change: That also then starts to become the backup 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,
Speaker Change: You're always going to have that peaking storage capability of the oxygen oxalate 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: Yeah, thanks Danny. I think you covered it well. Just a few other points is...
Brian Allen: 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 turbo expander, it's the same compressor's pumps.
Brian Allen: But there is significant construction savings just for the EPC to do duplicate power trains and this plays out in the power industry when you do a, let's say, a combined cycle plant and you're doing multiple turbines.
Brian Allen: that are the same, there's just significant learnings on the site and spreading of, let's say, your overhead indirect construction costs.
Brian Allen: across a larger facility. So, and then as you've 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 treatments, so there are pure savings by combining, you know,
Brian Allen: multiple plants at the same site and then in other cases it's savings on construction doing project over project.
Thank you.
Speaker Change: Thanks, helpful for both of those. And then on the inflation of capital equipment, just curious on a couple things.
Speaker Change: First, is it electrical equipment and broad-based across other components that you need, you know, pipes, valves, fittings, et cetera? And then, 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.
Speaker Change: Yes, 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.
Speaker Change: There, if you look at heat exchangers, turbo machinery, electrical equipment, those are the things that we've been either purchasing long leads or getting indicative quotes with our partners.
Speaker Change: In terms of the bulk, all of that will be coming through really the Zachry feed.
Speaker Change: So, we anticipate, you know, whether it's pipe, fittings, valves, you know, 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.
Speaker Change: Yeah, the only other thing I'd add to that is we do have a playbook on negotiating for these things. So we're, you know, we have received indicatives. We have still to go through the negotiating process, so there's only more that we can really say on that point.
Speaker Change: Thank you. Our next questions come from the line of Betty Jungs with Barclays. Please proceed with your questions.
Speaker Change: 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 hour.
Speaker Change: 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.
Speaker Change: 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, you know, it really does become a very customizable sort of decision of
Brian Allen: 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?
Brian Allen: ...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 many hours or days of storage do you want to have?
Brian, any new ones you want to add to it?
Brian Allen: Yeah, sure. So the oxygen storage is inherent in our cycle. You know, we use gaseous oxygen, but we would store liquid oxygen as...
Brian Allen: let's say backup. 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 backup redundancy for startup and so forth, or do you oversize it for this storage mechanism? And that's why we put a range.
Speaker Change: on the slide that you saw of 10 to 25 percent of base load. 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 LOX tank.
Speaker Change: 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 base load capacity. So this will be something we look at.
application by application.
No, that's helpful. So maybe thinking
Speaker Change: this solution, would you be thinking about monetizing this separately, one, as in a single net power plant, but the base load is being monetized separately from the peak power?
Speaker Change: Right. Yeah, Betty, I think, you know, if you think about it through the lens of, you know, just selling a license to build a net power plant, you know, from our perspective, you know, the customer is really going to look at...
Speaker Change: what's the total intrinsic value of the net power plant? You know, I think everything that we've really been doing internally, you know, to date, has really been focused on, you know, the baseload power output of this facility. And we really haven't been trying to ascribe much value to...
Speaker Change: 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...
Speaker Change: this 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
365 days a year.
Speaker Change: 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 nighttime power load, really as you look at just the cycling of renewables from daytime to nighttime.
Speaker Change: That's what the grid needs, is that sort of dispatchable, you know, response power. And so, you know, right now I think there's a little bit of a logjam with what's happening on...
Speaker Change: 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 it compromising just the reliability of the grid system. So we're kind of just sitting here today with this
Speaker Change: This, you know, inherent solution that's part of that oxycombustion process where we're kind of saying
Thank you.
Speaker Change: 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 20 far around-the-clock prices,
There's real value there
Speaker Change: back to Brian's point in mine earlier on just how quickly you can recharge and dispatch.
Speaker Change: If that is a nightly occurrence, or if you're in an area where there's weather events, whether it's cold winters or hot summers.
Speaker Change: You can have those seasonal opportunities to be able to capture much, much higher prices.
Speaker Change: 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, you know,
Speaker Change: The intrinsic value of this oxygen piece relative to the cost to install oxygen storage tanks
Thank you.
Speaker Change: 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.
Speaker Change: to pick up where that energy is coming from. But, you know, no matter how we slice it, this becomes probably the lowest-cost, long-duration energy storage.
Speaker Change: in the world. So it's a really, really interesting one and it's something that the market really needs given this 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.
Thank you very much for that color.
Speaker Change: Thank you. Our next questions come from the line of Pavel Molchanov with Raymond James. Please proceed with your questions.
Pavel Molchanov: Yeah, thanks for taking the question. In your prepared remarks, you, um...
Pavel Molchanov: Give some thoughts kind of post-election. I wanted to zoom in specifically on 45Q. You know, obviously, you know, there will be some conversations in Congress about making changes to the Inflation Reduction Act, potentially, you know, cutting
Pavel Molchanov: Some of the stuff out of there any concerns that 45q might be on the proverbial chopping block
Speaker Change: Yeah, no, that's a great question, Pavel, and good to have you on the call with us today. No, not really. I think when we look at...
Speaker Change: you know, all of the things that are eligible for the IRA and what things really kind of become those, you know, bipartisan solutions. I would say carbon capture is probably near the top of that list.
Speaker Change: because I think if you take a step back and look at what carbon capture enables us to do, one, we think it's the most
Speaker Change: impactful way to be able to decarbonize. And I think if you look at just what net power is able to offer,
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: NetPower is a unique technology in that it actually leverages fossil fuels.
Speaker Change: fossil fuel development in order to be able to lower energy prices to consumers.
Speaker Change: And so, NetPower, you know, it's a natural gas-fired power plant, so we actually use that feedstock to our benefit. And certainly, within the 45Q, you know, it's not just using natural gas.
Speaker Change: but it's developing new wells using the natural gas and the oil industry to be able to do that work for us.
Speaker Change: 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 carbon capture.
Speaker Change: It's going to be carbon capture for all the reasons that I just mentioned. And then obviously, you know, the other thing that would be really, really nice to see is an administration that actually supports
The 45Q for EOR.
Speaker Change: Right now, there's a $60 per ton, 45Q credit if you use the CO2 for EOR.
Speaker Change: 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 six permanent geologic sequestration, but I think as we're being able to demonstrate with Project Permia in West Texas.
Speaker Change: There's a ton of economic and industrial value for being able to take that co2 and use it in a really really de-risked way and enhance oil recovery applications.
Speaker Change: That's what we're doing on Project Permian to be able to de-risk and catalyze our commercialization.
Speaker Change: And again, that plays right into the skill set and experience of the fossil industry.
Speaker Change: This is a lot of the US to get to where it is today as an economic superpower. So we hope to see 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.
Speaker Change: Talk about the kinds of conversations you're having outside of North America. What kind of the international opportunity set looks like?
Yeah, I would say...
Speaker Change: 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, you know, 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.
Speaker Change: tangible value in the form of the carbon incentives from the programs like the 45Q.
Speaker Change: or from a carbon tax like you have up in Alberta, Canada.
And so North America is just a place where...
Speaker Change: These plants have not just the highest intrinsic value, but it's also 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, really interesting to us,
Australia is starting to pick up steam.
Speaker Change: 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.
Speaker Change: And what are they going to do on the sequestration side? And so as the market just continues to mature You know, we're really going to be focused on scaling up here in the United States. And then, you know, as we've mentioned before
Speaker Change: 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.
Speaker Change: The biggest thing over there is that if they're going to be an incentive on the sequestration side, you can get paid for the sequestration.
Speaker Change: rather than just allowing the free markets to put a price on or a value on it. So, these other markets are interesting. Europe's
Speaker Change: You know, Europe just needs to get its energy act together altogether. But as they do that, you know, it'll certainly... I think it'll certainly lead people to see that.
Speaker Change: Solutions like NetPower 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.
Speaker Change: We're focused, we think, in the absolute right markets, the absolute biggest markets.
Speaker Change: And it's nice that this U.S.-based technology is going to be, you know, not just commercialized here in the U.S., but it's going to be scaled here in the U.S. and Canada, really for the benefit of global deployments further down the line.
Thanks very much
Thanks, Pavel.
Speaker Change: I am not showing any further questions. Oh, sorry about that. Our next questions come from the line of Noel Parts with the Tui Brothers. Please proceed with your question.
Hi, good morning.
They know.
Just a couple of things. One I was wondering about,
Speaker Change: You mentioned that, or one thing I've been thinking about is
Speaker Change: Is, of the various types of partnerships that you already have in place, and some of them extending to additional regions,
Is there any...
Speaker Change: 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.
Thank you, sir.
Oh, yeah.
Speaker Change: Yeah, 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
Speaker Change: Certainly, like the gas supply piece is a big one, right? I think one of the interesting things that you're seeing in this space is the folks that do a lot of the gas transportation.
Speaker Change: whether it's through existing long-haul interstate pipelines or just the regional, you know, gathering systems in some of these basins where we're looking to deploy these plants.
Speaker Change: A lot of those midstream companies are now starting to figure out, I have a tangential skill set in providing CO2 transportation in 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.
Speaker Change: They're also looking at how can we twin these lines with a CO2 line, because it's a skill set they have with being able to construct and operate, you know, gas transportation facilities, and CO2 is not terribly different.
Speaker Change: So, you know, the conversations that we're having with folks on the gas supply side.
Speaker Change: It's that dual skill set that they provide 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.
Speaker Change: No, I think it would be more strategic with constructing new assets, upgrading, increasing the capacity of certain assets, you know. And I think that's just one of like the beauties of net power is, you know, our plants will be able to increase new demand for natural gas in certain areas that can justify
Speaker Change: increasing the size of the gas pipeline while at the same time justifying in being able to underwrite the construction of a CO2 line just given the volumes that we're talking about coming from our plants.
Speaker Change: I mean, it's a lot of CO2 that we're capturing, you know, nearly 900,000 tons.
Speaker Change: For each of these plants and so if you're talking if we're talking about you know a fleet configuration of four to ten net power plants
Speaker Change: and, you know, three and a half to nine million tons of CO2 per year, you can justify building a 200 to 500 mile pipeline.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: And so you're going to need volume to be able to underwrite those investments.
Speaker Change: NetPower 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.
Speaker Change: They certainly want to see, you know, increased demand for natural gas and we can provide not only that, but we can provide another revenue line for them which is the CO2 transport and sequestration on the back end of the plant.
Speaker Change: Really, really strategic and symbiotic sort of relationship between us and the gas infrastructure players.
Thanks. Great to hear. That's all I had.
Thanks, Noel.
Speaker Change: Thank you. I'm showing no further questions at this time. I'd now like to hand the call back over to Daniel Rice for any closing comments.
Daniel 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 with Baker right now.
Daniel Rice: A lot of things coming on the pike, the open book estimate from Zachary will be coming back later this year. So I look forward to getting 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.
Daniel Rice: 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.
Speaker Change: 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.