Q4 2024 NET Power Inc Earnings Call
Speaker Change: Greetings and welcome to the Net Power Inc. 4th quarter, 2024 earnings call. At this time, the Mall participants certainly listen only mode. If anyone should require operator assistance, please press star zero on your telephone keypad.
A Question and Intercession will follow the formal presentation.
Speaker Change: He may be placed into question-cute any time by pressing star one under telephone keypad. As a reminder, this conference is being recorded. It's not my pleasure to turn the call over to Bryce Mendes, director of Investor Relations. Bryce, please go ahead.
Bryce Mendes: Good morning and welcome to Net Power's fourth quarter, 2024 earnings conference call. With me on the call today we have our Chief Executive Officer, Daniel Rice, our President and Chief Operating Officer, Brian Allen, and our Chief Financial Officer, Akash Patel.
Speaker Change: Today we issued our earnings release for the fourth quarter of 2024. It can be found on our Invest Relations website along with this presentation at ir.netpower.com
Speaker Change: During this call, our remarks and responses to questions may include forward-looking statements.
These risks and uncertainties are discussed in our SEC filings.
Speaker Change: Please note that we assume no obligation to update any chord looking stakes.
Speaker Change: But that, I'll now pass it over to Danny Rice, Net Power's Chief Executive Officer [inaudible]
Danny Rice: Thank you, Bryce, and good morning, everyone. I'd like to start by saying 2024 was the year of significant progress for Net Power, even amidst the challenging more conditions we faced while commercializing our technology.
Danny Rice: We completed the front end engineering design or feed for Project Permian, which we referred to as SN1, marking a major milestone for the world's first utility scale fully integrated clean gas power plant of its kind.
Danny Rice: We also kicked off the first phase of our equipment validation program with Baker Hughes at our report demonstration facility, achieving successful admission on demand in accumulating over 145 hours today.
Danny Rice: As many of you know, the energy sector has been grappling with unprecedented demand for reliable generation capacity, driven by more than a decade of under-investment in power infrastructure and baseline generation, which is now compounded by rapid load growth, especially from AI and data centers.
Danny Rice: This unprecedented demand response for new baseline generation, which Net Power is developing has led to significant inflationary pressures across the sector.
Danny Rice: Completing the feed gave us a detailed indicative estimate, including a build-up of material quantum-decent labor costs, but it also revealed areas where we can meaningfully reduce costs at our first deployment.
Danny Rice: I'd characterize this as fairly standard in bringing a new technology to market.
Danny Rice: As a result, we've shifted our focus to a post-feed optimization and value engineering exercise to strip costs from SN1 and our standard plant design with minimal impact performance, bringing us closer to delivering the lowest cost form of clean, firm power that's scalable.
Danny Rice: Before I dive deeper into our strategic pivot and outlook, I'd like to frame the broader macro context we're operating in.
Danny Rice: The Surgeon Love Growth, particularly from AI, just further underscores the value of reliable energy.
Danny Rice: But now the incoming load growth is quickly strong that pendulum and the opposite direction driving a singular focus on adding reliable affordable power is quickly as possible.
Danny Rice: We're caught in the middle of this frenzy. Our plants' extracted costs are impacted by the same tightness everyone in the power sector is seeing, especially those developing new base load thermal generation solutions.
Danny Rice: Which makes it a little bit tougher for us to negotiate when we're competing with companies ordering much more than we are but we remain focused on proving our technology and positioning to be the lowest cost source of clean from power in the coming decade.
Danny Rice: With over $530 million in liquidity year end, we're in a strong position to advance our technology, optimize our plant designs, and attract the right strategic partners to unlock this technology's potential.
Speaker Change: I'll now walk through our key milestones from 2024 and our priorities for 2025 before handing it over to Brian for operational updates and Akash for the financials.
Turning with Project Permian [inaudible]
Speaker Change: Completing the feed was a major undertaking between us and our feed partner, the Zachary Group.
Speaker Change: As far as we know, this was the largest ever feed completed in the last few years for a clean gas power plant. In some ways, the feed was a significant re-de-risking event for the company as it identified no fail flaws in the technology or plant design. And as a plant, we could go build today absent the cost, economic and fundraising constraints. I'll now touch on.
Speaker Change: On the cost side, the indicative estimate highlighted the market challenges we face as our technology is an immune to the inflationary pressures impacting the entire sector as I just mentioned.
Speaker Change: For reference, when we went public in 2023, our preliminary cap assessment for us in one was $950 million.
Speaker Change: In the years that followed, we've revised that forecast upwards to $1.1 billion.
Speaker Change: and then hired to better reflect the rising costs around us. And now, based on the completed feed and where we think we'll land with the value engineering work, we started this quarter.
Speaker Change: We're estimating total and sold cost will be 1.7 to $2 billion.
Speaker Change: This represents an approximately 100% increase in our total installed cost estimate with the inflationary pressure being a large factor along with the site and project specific items I'll touch on later.
Speaker Change: This increase is in line with the cost increases being seen by unabated gas projects. For reference, combined cycle gas turbines or CCGTs, a estimated cost of around $1,100 per kilowatt, just a few years ago.
Speaker Change: That figure rose to $1,500 per kilowatt last year, and now we're seeing a new combined cycle project by the North of $2,200 per kilowatt.
Speaker Change: If and when the global supply chain catches up to this demand, we'd expect to see meaningful cost deflation above and beyond the cost savings we hope to achieve through value engineering and our multi-plant initiatives.
Speaker Change: Partly personal with the cost inflation is just the tightness in the global energy supply chain.
Speaker Change: Anybody looking to order a CCGT is likely looking at 2030 for base case deliveries.
Speaker Change: and I think we've done a commendable job lining up the supply chain to deliver our plants on a timeline that's competitive with other gas solutions.
Speaker Change: with Project Permian Feed. We also learned that a significant amount of costs are unique to West Texas in the first to become nature of SN1.
Speaker Change: Brian will go into more detail in our value engineering, but I'll just add that the Permian has great features that make it an ideal place to put a first-of-a-kind facility, including access to low-cost natural gas and well-established CO2 sinks.
Speaker Change: But unfortunately, unfortunately, the inherent higher cost to build the West Texas challenges plants economics and ultimately hinders our ability to get the project financed today.
Speaker Change: With this backdrop, our focus is now on plant cost reductions.
for 2025, we're focused on three things. First,
Speaker Change: We'll continue the value engineering exercise to further reduce costs for Project Permian. Second, we'll complete the feasibility studies we kicked up earlier this year for multi-unit projects along the Gulf Coast, which we believe will demonstrate further cost reductions.
Speaker Change: In thirds, with a lower cost project perian and a line of sight to material cost reductions from Gulf Coast mega projects, we'll seek to raise capital and form projects to commercialize the technology.
Speaker Change: Now the ultimate goal here is to be the lowest cost form of clean firm power at a reasonable premium to carbon-emitting alternatives.
Speaker Change: So quickly touching on our competitive positioning versus the alternative forms of clean from power that can be deployed, first there's post-conversion carbon capture or PCC.
Speaker Change: CCC increases the development operational complexity of a combined cycle, and the costs are not well established because it hasn't been successfully deployed at scale, particularly for CCTs.
Speaker Change: where there is a low concentration of CO2 in the flu gas stream.
Speaker Change: And with commercial demand here today to build new unabated combined cycles, developers aren't required to install PCC in order to secure long-term PPAs to help underwrite
Speaker Change: Interestingly, PCC reduces the amount of net electric output from combined cycles. So in a load growth scenario like we're in now, installing PCC is counterproductive to the grid's primary needs.
Speaker Change: Bottoms up estimates to just new nuclear projects carrying LCOE of over $200 per megawatt hour today in first deployments of 10 years away.
Speaker Change: We consider ourselves energy altruists, and we want to see all forms of clean, reliable, affordable power succeed.
Speaker Change: But we're also energy railists too, and it's hard to see nuclear as a viable option for at least the next decade.
Speaker Change: That it doesn't mean the US and others shouldn't invest in advancing nuclear technology.
Speaker Change: But we think there's a big difference between deploying now which is impossible and advancing the technology through 2035 and deploying it a decade from then.
Speaker Change: Newt Nuclear has time to mature, thankfully, due to the availability today of firm technologies like combined cycles and clean firm solutions available much sooner like ours.
Speaker Change: So as we think about our timing, operationally we'll be ready to go this decade if we can get costs down and create a viable pathway to economic commercialization.
Speaker Change: This pause is frustrating, but necessary. And yet, we think we're still years ahead of competing technologies.
Speaker Change: So in a way, we have the benefit of time to ensure we get it right before embarking on a pathway that will require billions of dollars from strategic commercial partners for project level funding to reach our desired end state as the lowest cost form of clean from power.
Speaker Change: In addition to the value engineering and multi-unit pre-feed exercise, our related area focused this year is securing sites along the Gulf Coast for modular multi-unit deployments of up to one gigawatt each.
Speaker Change: These sites can also co-locate with large load data centers or industrial users. However, which of these projects should become slotted for SN2 or 3 will ultimately depend on securing strategic capital partners.
Speaker Change: Beyond SN1, we've begun evaluating other creative ways to commercialize this technology and unlock its embedded value. For example, Baker Hughes and Wood Fives have kicked off the industrial scale program to target industrial applications looking for clean, reliable power.
Speaker Change: This smaller scale power plant would be a true licensing opportunity for Net Power with limited capital required from us. So with that, I'll hand it over to Brian for operational updates.
Thanks, Annie.
Speaker Change: On Project Permian, as Danny mentioned, we completed the feed in the fourth quarter, a major milestone for our team. The resulting project total install cost estimate was higher than expected.
Speaker Change: I will provide a little more detail on what we have learned and what we will do next.
Speaker Change: The feed provided us crucial design information and an indicative cost estimate and schedule that reflect today's market realities.
Speaker Change: The engineering work that has been completed has identified and solved many of the technical issues that emerge as you apply a technology like ours for a first time to a project-specific site application.
Speaker Change: This is a notable de-risking event for us and as we have worked through and identified no fatal technical flaws to date in the balance of plant when deploying our technology at full scale to a site-like project permit.
Speaker Change: The engineering deliverables also form a really solid basis for us to develop our standard plantas on, which I will speak about later.
Speaker Change: Regarding techno economics, our engineering team has been optimizing our process design and making trade-off decisions based on our most recent pre-feed using our best judgment on how to account for cost escalation.
Speaker Change: By working through this feed process, we now have up-to-date indicative costs, including equipment pricing, bulk material costs, craft labor installation rates, and transportation costs.
Speaker Change: This is a large industrial project and we have now matured the design to be able to directly quantify the site's specific cost for Permian.
Speaker Change: There are many great attributes to Project Permian, including the derisking afforded by utilizing OXI's existing CO2 infrastructure, the access to skilled craft labor, the regional need for clean base load power, and a supportive local community.
Speaker Change: Like any say, though, there are also areas that can drive cost challenges [inaudible]
Speaker Change: The natural gas in this part of the country has four to five times the nitrogen content of other basins in North America, which requires purification equipment, which adds
Speaker Change: Another challenge is the inland site location. Large equipment shipments into the major ports in Texas will encounter several hundred bridges and a couple hundred transmission lines along the route to get to this site.
Speaker Change: This can be dealt with, but it does lead to overall weight and size restrictions we need to meet.
Speaker Change: Therefore, we have to break up our equipment, skids and modules into smaller transportation loads by rail extract.
Speaker Change: When coupling that reality with our desire for the fastest feasible project schedule, it really forced the design into what the EPC industry would call a stick built design, which limits the ability to modularize and drives up the craft labor hours at the job site.
Speaker Change: Other challenges to this site include the cooling water availability and water quality, driving a very extensive water treatment plant design that has had an impact to our cooling system material selection and cost.
Speaker Change: We now have this design and cost information, and it informs us on what to do next. We have started a two-prong approach. One is related to next steps and project permit, and the other is related to our standard product for deployment on future projects.
Speaker Change: For Project Fermion, we have now shifted into a post-feed optimization and value engineering process with Zachary, expected to finalize and result in a firm price this year.
Speaker Change: In the past two months, Wei and Zachary had identified hundreds of opportunities to value and sugar the design, and today have already reduced the site footprint by approximately
Speaker Change: Our goal remains to get total install costs as close to 1.7 billion as possible or below without compromising performance or validation of the technology.
Speaker Change: We will focus on areas like Techno Economic Trade-Offs, Truckable Module Designs for the Pipe Racks, reducing design allowances and contingencies, and making site-specific adjustments.
Speaker Change: We are also beginning to get a better view on the site-specific performance impacts and now have better information to optimize cost and performance, similar to the approach taken with other power plants.
Speaker Change: Given this ongoing value engineering, we felt it was prudent to stop any further long lead equipment releases and ensure that we have maximum flexibility to reduce cost and not block ourselves from making changes to equipment specs.
Speaker Change: The schedule therefore needs to adjust. Assuming we secure the necessary capital for project permit after finalizing the firm project costs.
Speaker Change: The project timeline likely pushes to a best case of groundbreaking in 2027 with an in-service stage in 2029.
Speaker Change: On the next slide, I would like to shift gears to our standard product approach.
Speaker Change: We have always viewed that the best way for us to achieve our cost targets, that ability to scale was to take a product-driven approach, encompassing a set of standard plant designs with pre-engineered standard options.
Speaker Change: This is similar to the approach taken by Power Generation Turb and PoE ends.
Speaker Change: Permian has helped inform what our single unit inland standard design should look like once we pair back some of its site-specific features and adjust the design for truckable modules.
Speaker Change: Targeting the most competitive product we can develop, we have launched a large modular multi-unit feasibility study to develop a standardized design targeting coastal locations that enhance the scalability and reduce its cost.
Speaker Change: This complements our broader cost-down exercise for both S&1 and future deployments with the goal of our Generation 1 achieving the most competitive, clean, baseload power cost in the market.
Speaker Change: As part of this design effort, we're also evaluating coastal site locations for projects in the 2030-2033 timeframe which could benefit from modularization and eliminate costly inland transportation challenges and the large construction labor man hours for stick built sites.
Speaker Change: We are also looking to drive up the size of our standard product, no different than the
Speaker Change: On the next slide, I will address our report demonstration facility where we commence the first phase of our equipment validation program with Baker Hughes in the fourth quarter.
Speaker Change: In order to begin the burner testing, we first had to upgrade and recommission the plant after having been idled since the 2021 testing campaign.
Speaker Change: Our team, along with Constellation and a dedicated group of skilled contractors, performed over 150,000 hours of construction work to upgrade and improve the plan to meet the test requirements.
Speaker Change: I am really proud of the team and our contractors for safely performing this construction work with no recordable injuries.
Speaker Change: As we commissioned the plant, we worked through typical shakeout issues as we operated the facility that had been idle for a few years.
Speaker Change: I'm proud to say the facility has now achieved an operating window of higher pressure and temperature combinations than those achieved in the 2021 test campaign.
regarding the burner testing.
Speaker Change: Baker Hughes has achieved burner ignition such that the facility is often operated and what we would call fired operation where heat is being put into the CO2 working fluid by the burner and recirculated throughout the entire plant.
Speaker Change: To date, the facility has accumulated over 140 fired hours of operation during phase one.
and had a continuous run of over 24 hours.
Speaker Change: Starting to the next slide, we will continue to work with Baker as they test multiple burner configurations and collect the data they required to move to Phase 2 later this year.
Speaker Change: In Phase 2, they will begin testing selected combustor cans for final down selection, after which they will manufacture multiple combustor cans to support the phase 4 demonstrator turbo of standard testing.
Speaker Change: This four phase testing program is scheduled to be completed in 2027.
Speaker Change: Finally, I'm excited about the collaboration framework announced by Baker Hughes and Woodside Energy to develop an industrial-scale net-power solution for smaller applications like oil and gas, LNG, at the industries and small-scale data centers.
Speaker Change: This program will benefit from our ongoing validation efforts at the port and the development of S&1 and our standard products while opening up new licensing opportunities with minimal capital outlay from Net Power.
Speaker Change: We stand ready to support Baker, Woodside, and other future program participants with the Net Power Process IP we have developed in order to ensure a competitive and successful program.
Speaker Change: This program is a great complement to our utility scale efforts and broadens the potential applications of our technology.
Akash Patel: With that, I'll turn it over to Akash for the financial update.
Akash Patel: Thank you, Brian , and good morning to everyone. Let's start with our liquidity position which remains a key strength for Net Power. We closed 2024 with 533 million in cash, cash equivalents and investments down from approximately 580 million at the end of Q3.
Akash Patel: This decrease reflects approximately 13 million in operating cash outflows and approximately 29 million in capital expenditures, primarily tied to the port upgrades and SN1 development.
Akash Patel: For the full year, our operating cash outflows were approximately 32 million, with total capital expenditures of roughly 70 million.
Akash Patel: The operating cash outflow included approximately 18 million in cash payments to Baker Hughes under the JDA in 2024.
Akash Patel: Thus, the operating cash outflow in 2024 excluding the Baker Hughes JDA cash payments was approximately 14 million.
Akash Patel: Looking ahead to 2025, we'll continue to deploy capital prudently, focusing on advancing our validation program at Laport through phases 1 and 2, as well as preparing for phases 3 and 4.
Akash Patel: On the funding side for S&1, if we had $1.7 to $2 billion today, we'd wrap up the value optimization exercise this year to clear FID at your end and break round in the middle of 2026 to target having the plant online in 2028.
Akash Patel: We're keeping things moving on many projects fronts to preserve the ability to deploy project premium as quickly as possible, but there will be a day-for-day slippage in first fire until we reach FID. So, if FID occurs in the middle of next year, we'd expect to have the plant online in
Akash Patel: But given the uncertainty in raising the Capitol, it's nearly impossible to attempt to put a date on when we could reach FID.
Danny Rice: As Daniel mentioned, we've earmarked 200 million in hour liquidity for FN1.
Danny Rice: We spent about 50 million to date on engineering and long lead items.
Danny Rice: We believe current SN1 economics can support up to approximately 600 million in project level financing which...
Combined with our 200 million.
Danny Rice: and initial indications from our strategic owners, these roughly 600 to 900 million in new capital needed to fully fund the project.
Danny Rice: We're actively exploring strategic partnerships and capital solutions at both the project and power levels to fill this gap.
Danny Rice: Now, like many of you know, the investment proposition for Net Power is to develop and license these plants, not to be the constructor and owner of that.
Danny Rice: We're well capitalized to develop our technology and get it commercial ready, but we're not properly capitalized to fund and FID the projects themselves. They're just too big for a company of our size.
Danny Rice: But they are certainly right size for the broad array of customers looking to install hundreds of kikawatts of clean, reliable power generation over the coming decade.
Danny Rice: Our balance sheet gives us a significant runway to execute our 2025 priorities while navigating the challenging market environment.
Danny Rice: We remain focused on maximizing the value of our proprietary Net Power Cycle and positioning the company for long-term success.
Danny Rice: With that, I'll pass it back to Daniel for closing remarks before we open it up for Q&A.
Daniel: Thanks, Akash. To wrap up, our mission remains clear. To deliver clean, reliable, and affordable power at scale.
Daniel: While the macro environment presents challenges, particularly around costs and capital access, it also underscores the immense opportunity for Net Power. The world needs solutions that balance low growth with decarbonization and we believe our technologies uniquely position to meet that. [inaudible]
Daniel: With our focus on cost optimization, modular design, and strategic partnerships, we're committed to getting SN1 across the finish line and paving the way for future multi-unit deployments.
Daniel: We'll continue to advance our utility-scale validation testing with Baker Hughes at report, complete our value engineering for SN1, and line up the capital to break ground.
Daniel: We've got a lot of work ahead, but I'm confident in our team's ability to execute and deliver value to our shareholders So with that operator, let's open it up for questions
Speaker Change: Certainly, we'll not be conducting a question and answer session. If you'd like to be placed in the question queue, please press star 1 under telephone keypad. A confirmation tone will indicate your line is in the question queue.
Speaker Change: You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, maybe necessary to pick up your handset before pressing star one. One moment please, while we pull for questions.
Speaker Change: Our first question is going to be from Thomas Meric from Genome like a Mishra, you know, is that life?
Speaker Change: Good morning, Danny Bryan, Akash. Thanks for all the details on the call, especially with regards to the CAPAX and what you're working on.
and I have a couple questions on CapEx.
Speaker Change: I mean, not surprisingly, but I appreciate congratulations on getting the feed done and technical fatal flaws there, so congrats.
Speaker Change: on CapEx, you know, I'm wondering if you could break out labor costs, maybe later labor productivity assumptions within the feed at this point and...
Speaker Change: You just had to think about some of those changes versus prior expectations and maybe raw materials in there as well.
Hey Thomas, this is Brian . Thanks for the question.
Speaker Change: Yeah, we're not going to be able to provide a breakdown at this point, but I will, you know, provide a summary of some of the drivers here. First of all, you know, there's, I'd say markets supply demand imbalance that we've been seeing in them.
Speaker Change: Operates reliably and we compare some of those back once <unk>. One operates for future plans and then you have the Permian specific items. So there is somewhat all intermingled, it's kind of hard to break it up into percentages, but in totality. That's that's what drove the increase.
Speaker Change: Yeah.
Speaker Change: Got you that's helpful and then.
Speaker Change: Follow up question just on broader Capex for thermal technologies, I think everyone's pretty familiar with the numbers you cited as well as the chart in your deck. So I appreciate that.
Speaker Change: But.
Speaker Change: Yes, Im asking this question more from your perspective with your owners group and you and your partners.
Speaker Change: How do you see.
Speaker Change: Thermal capex declining.
Speaker Change: Over the next several years as folks look to bring projects online.
Speaker Change: Getting from 2200 to 1000 for an unabated CGT.
Speaker Change: Certainly it seems.
Speaker Change: Somewhat ambitious so just how do you from your conversations how do you see that transpiring and then.
Speaker Change: And a follow up to that and then I'll be done is just as you have conversations with potential data center operators.
Speaker Change: How are they looking at these cost increases as potentially an.
Speaker Change: Opportunity to kind of bridge a funding gap.
Speaker Change: Thinking of a cost that that $600 million to $900 million Daffy mentioned, so all of those would be helpful and I appreciate it. Thank you.
Danny Rice: Hey, Thomas this is Danny I think.
Speaker Change: When we look at the cost of of really what's the marginal cost of of new supply, which is the combined cycles.
Danny Rice: At 2200 kw.
Danny Rice: Badly and book gets to like $65 $70 per megawatt hour for the LCR.
Danny Rice: Yes.
Danny Rice: From our vantage point, we don't we don't think we're going to see Capex deflation anytime soon well if people continue to have pretty tight supply chains going out at the beginning of next decade. So we're not contemplating we're going to see this deflation.
Speaker Change: As another way for us to seek Capex reductions and I think that's one of the big reasons behind this initiative on alright lets start to get ahead of really being able to scope out cost savings of this multi pack deployment, because I think as Brian talked about earlier.
Danny Rice: One of the bigger drivers of just.
Danny Rice: The project Permian or really the first project being the most expensive one is because it's going to be a single unit pack, whereas we can say you're comfortably say today because.
Danny Rice: If we can deploy this in two to four pack installments youre going to see meaningful capex reductions on a per unit facility. So that plus the pre fabrication in the modular station in sort of that close to the application is going to be a huge driver of cost reduction for us absent deflation in the power sector. We just we just don't see it coming.
Danny Rice: And so I think.
Danny Rice: As we look at where do we think we need to get to with <unk>.
Danny Rice: <unk> at $65 70, maybe that goes to 75, those things being contracted out 90 to $95 per megawatt hour.
Danny Rice: We're going to be sending a bogey, that's not going to be terribly higher than that.
For us to be able to get to that sort of number it's going to require us getting into that multi plant sort of configuration.
Danny Rice: That's not quite challenging for.
Danny Rice: For construction, which means trying to get to places, where we don't necessarily have to stick build everything the way, we're going to have to put the first plant.
Danny Rice: Kind of like we've said all along the first plan is really to prove the technology, it's not going to be the plan that demonstrates the economics. It is to prove the safe reliable operations and so.
Danny Rice: The bigger initiatives for the first one isn't so much on demonstrating the economics, it's getting the project funded and so was this capex increase that we're seeing right now it's really just a function of can we get the capex down to a place that we can get it funded and I think part and parcel with being able to get it funded as being able to demonstrate a pathway to a really really competitive.
Danny Rice: Relative to the next best alternative which is unabated CCT.
Thomas Merritt: And then Thomas maybe I'll take the second part.
Speaker Change: Your second question, there, which is how do we think about the funding gap and what are the different avenues.
And potential counterparties to help with that so I.
Speaker Change: Think broadly there is theres really four ways to approach funding right. There is project level capital there is no power topco level capital there.
Speaker Change: There is government support whether thats the daily at the federal level or the Texas Energy fund at the state level and then the fourth kind of.
Speaker Change: It can go to both top top tier or project, which is commercial partnerships right, whether that's partnering with your off take or whether that.
Speaker Change: Partnering with another strategic.
Speaker Change: Do you have preferential treatment on deploying projects.
Speaker Change: And those types of things and so we're thinking certainly very creatively on how to pursue all of those areas, particularly that last the last leg of the stool there on the commercial partnerships.
Speaker Change: Okay.
Speaker Change: Thank you. Your next question is coming from Martin Malloy from Johnson Rice. Your line is now live.
Martin Malloy: Good morning.
Martin Malloy: I wanted to ask about.
Martin Malloy: The modular station.
Martin Malloy: That path and maybe if you might be able to talk about.
Some of the.
Martin Malloy: The milestones we should look for the timetable there I think it's.
Martin Malloy: Modular <unk>.
Martin Malloy: Proved to be effective in terms of reducing costs and reducing the construction timeline on.
Martin Malloy: Larger projects in.
Speaker Change: Baker Hughes.
Speaker Change: On some LNG projects has proven that they are capable of helping.
Reduce the cost and everything through modernization could you just talk about milestones or timelines, we should look forward.
Speaker Change: With that.
Bryan: Yes, Marty this is Bryan.
Speaker Change: Yes, you are right it's another lever.
Speaker Change: Really powerful right.
Speaker Change: Which is why we're pursuing it I would say just stepping back to Permian.
Speaker Change: We have known and are have been pushing for as much modular station as in one site would allow but as I have said in her remarks.
Speaker Change: <unk>.
Speaker Change: The inland side, you typically have hundreds of bridges and so forth that you have to reverse so.
Speaker Change: It just sets a maximum logistical constraints.
I would say with the speed we've been driving on this project.
Speaker Change: There is still more to squeeze there in terms of more Modularized nation at that project site. So that's something we're working with <unk> on the value engineering as we speak is just Max out.
Speaker Change: The size of the loads.
Speaker Change: Korea Assembly pre fabrication and smaller modules that we send to inland sites.
Back to coastal and Mega module was always in our plans, but as Dan said.
Speaker Change: As you look forward to the future deployment of our technology likely would be the most cost effective way to scale up to multi unit.
Speaker Change: Configuration, and heavy modular <unk> or Mega module potentially with almost no inland transport.
Speaker Change: So we've already kicked off.
Speaker Change: Work with an engineering firm on that and this year, we will look for feasibility under a potentially precede.
Speaker Change: To start getting a designed together an indicative costs.
Speaker Change: I think in future quarters, we will lay out milestones that you should expense, but right now that's the work we're going to do this year to quantify that and quantify as Daniel was saying fewer.
Speaker Change: Future target LCR that we.
Speaker Change: Headwinds that configuration.
Speaker Change: Great and for my follow up question I, just wanted to ask about with the New administration any any change in terms of discussions with the Doe.
Speaker Change: Or anything else.
Speaker Change: You might be able to.
Speaker Change: Add to how.
Speaker Change: How much support there is for <unk>.
Speaker Change: This type of project.
Speaker Change: Yes.
Martin Malloy: That's a great question Marty I mean, we can't talk about specific Congress, but I would say at a high level.
Speaker Change: I think if you look at all of the qualities of.
Speaker Change: Of net power in terms of its ability to use domestic natural gas in certain applications. You can use the cotwo to increase oil production domestic oil production.
Speaker Change: Those are the two key pillars of the Trump administration and what they are trying to achieve over the next four years is really just to ensure domestic energy security.
Speaker Change: I think net power is able to do both of those along with the third one which is reliable power with the load growth that we're seeing and the importance of reliable energy and the scope of AI and.
Speaker Change: Geopolitical security that way.
Speaker Change: Thank you.
Speaker Change: Everything that <unk> stands for it really aligns with the Trump administration.
Speaker Change: And we'll see where things go there and then I think the other piece that's still hanging out there is the <unk>.
Speaker Change: Of the 45 key what's going to happen.
Speaker Change: It's still to be determined it is interesting.
Speaker Change: From some people over 45, you are getting a cut and then you hear from others is <unk> actually going to get increased.
Speaker Change: With changing the effective date for the inflation rate.
Speaker Change: Which could add 10 to $20 per ton and then also getting to utilization.
Speaker Change: Utilization parity with permanent sequestration, which would take the $65 up to the $85. So there's a couple of incredible scenarios out there where you can see the utilization go from 65 to something like 105, and 85 going up to the $105. So those two things will definitely be beneficial to us.
Speaker Change: Look I think when we look at it from from our vantage point today seeing this inflation that we're seeing.
Speaker Change: It's all the more reason why you probably should.
Speaker Change: An increase in those sort of features because of the inflation that we're seeing today isn't isn't specific to our technology is really a byproduct of what youre seeing on this reactive load growth.
Speaker Change: Generation being built for <unk>, So I think for technologies emerging technologies like ours to have a real good chance of success I think support from programs like the 45 Q is pretty imperative.
Speaker Change: Great. Thank you I'll turn it back.
Speaker Change: Thank you as a reminder, that star one to be placed in the question queue. Our next question is coming from Noel Parks from Tuohy Brothers. Your line is now live.
Noel Parks: Hi, Good morning, just a couple of things.
Speaker Change: It does seem that.
Speaker Change: We're sort of in the situation with the AI driven power demand.
Speaker Change: That's on the horizon with.
Speaker Change: The industry the power players all meaning the crowd through the same door essentially two to deliver the capacity thats needed whether traditional gas turbines are.
Speaker Change: Michael grid solutions.
Speaker Change: Gas based and otherwise.
Speaker Change: So.
If there are similar.
Speaker Change: Cost increases on the way for other generation projects based on the factors that are affecting you.
Speaker Change: Do you think that the power end users and prospective end users are.
Speaker Change: Our realistic.
Speaker Change: At this point about how tight the country is going to be.
Speaker Change: Yes, it's a good question I think we talked about that on a bunch of internally a lot just the market have a really good handle on where power prices are going and probably more so than just power prices, but just availability of power.
Speaker Change: I mean, my opinion is no I think the market is still extremely extremely tight through the end of the decade, we started to exhaust some of just the production capacity of <unk>.
Speaker Change: And I think that's.
Speaker Change: One of the reasons why we have said hey, we've been we've been pushing really really hard to try to get this first project on as soon as we possibly could.
Speaker Change: The typical order of operations that any large project developer of some of our magnitude would go through is let's do the feed.
Speaker Change: Then go to RFID and then we'll start releasing long lead items, but I think the way. We went about it was we need to get this first plane on as soon as possible and we're not going to go into traditional holdover operations. We started releasing long lead equipment. While we were conducting the feed and I think as we got to the end of the feed we said hold on this market and the demand that we're seeing.
Speaker Change: Today, it's going to be there for the next 10 to 15 years.
Speaker Change: So is it really worth us really compromising the health of our balance sheet and the credibility of the company to try to move it one brick at a breakneck pace that.
Speaker Change: It doesn't get us to the market.
Speaker Change: Any sooner it probably just.
Speaker Change: It makes it a little bit harder for us as we continue to have just potential road bumps along the way.
Speaker Change: So what we're really doing now is is having like this healthy pause to recalibrate really understand what the market potential is really understand what our plan to competitive economics look like I think we're still in a position where we have pretty good line of sight of being the lowest cost form of clean prime power.
Speaker Change: Not just on an absolute basis on a relative basis, but on a timescale basis.
Speaker Change: I think thats related like the most important part is this is this is a world that needs as much reliable generation as it possibly can and I think what we're seeing in the market today is the market doesn't really care, if it's cleaner not they just care if it's scalable it's reliable limits available today and it will build as much of it is it can and if it happens to be affordable.
Speaker Change: That's great.
Speaker Change: And so we kind of see this market continuing to grow.
Speaker Change: And people have quickly moved from trying to find solutions for 26% and 27% now looking at 28 and 29.
Speaker Change: You can see with the CCT CCT.
Speaker Change: <unk> team folks are looking at 2030 in 2031, we're hearing people starting to <unk> projects in 2032.
Speaker Change: So.
Speaker Change: I don't know I think we're in a pretty unique place, where we're talking about being able to bring a first of a kind.
Speaker Change: Pretty transformative clean gas technology to the world. This decade, I think it's a pretty incredible for us for us to be in and so I think what we can really do is just ensure we take our time to get it right because the world needs solutions like this just as much as it does anything else.
Speaker Change: Right absolutely and.
Speaker Change: To the degree you can kind of characterize it.
Speaker Change: Yeah.
Speaker Change: For the more or less straight financial particularly potential financial partners that you contact from her or talk with.
Speaker Change: <unk>.
Speaker Change: Just curious do you.
Speaker Change: Or are there any types of issues that are coming up a lot I think I think about things like.
Speaker Change: Nearer nearer term financial commitments versus longer more.
Speaker Change: Involvement in what could be PPA type.
Speaker Change: Activities I'm, just sort of wondering what the financial players coming to the table have on their mind right now assuming of course everything that we've that everyone's talking about just with AI and power demand.
Speaker Change: Yes, I'll take that one this is all cash.
Speaker Change: I would say.
Speaker Change: The vast majority of the I'll say strategics that we're speaking to whether thats folks that want to do offtake or folks that want to providing infrastructure capital or folks that want to participate to decarbonize, our own operations I E utilities and oil and gas.
Speaker Change: They're all focused on not just the first unit and what is the pathway for us to deploy these these net power units at scale.
Speaker Change: And so.
Speaker Change: It's really a focus on the 2030 to 2035 timeframe and how does our.
Speaker Change: Ramp up and their ability to really deploy and use the learnings from the first one in there and gain comfort on construction operation commissioning et cetera allow them to really hit the ground running in the 2030 timeframe and I think that timing lines up pretty well given at this point if youre talking.
Speaker Change: About unplanned CGT here into 2030.
Speaker Change: And so our timing of when we really plan to ramp is really aligned with with the work they're doing right now for any type of new large scale power generation.
Speaker Change: Great. Thanks, a lot very helpful perspective.
Nate Pendleton: Thank you next question is coming from Nate Pendleton from Texas Capital. Your line is now live.
Nate Pendleton: Good morning, Thanks for taking my questions.
Nate Pendleton: Can you provide additional details on the industrial scale net power platform, specifically, how should we think about the total addressable market there and can you provide any high level differences in how the royalties maybe structured between utility scale and industrial scale plants.
Brian Allen: Yes. This is Brian.
Brian Allen: Yes, we're really excited about that platform.
Speaker Change: This is similar to other technologies you need different sizes.
Speaker Change: And shapes for the different market needs right.
Speaker Change: It does open up a whole new market compared to the utility.
We just talked prior about scaling these plants up to 600 megawatts to one gigawatt, but there are many industrial applications that need.
Speaker Change: Four seven clean power at a smaller scale behind the meter LNG.
Speaker Change: Other applications, we spoke about.
Speaker Change: So it does open up a new Tam, which I would say we're not ready.
Speaker Change: To lay out our values on that just yet, but we will in the future.
Speaker Change: As far as the.
Speaker Change: The size of this I would say.
Again, the work that bankers are going to do with Woodside and others on US is really nail down what is that target best fit across multiple different sectors.
Speaker Change: But you should be thinking it's less than half of let's say the utility scale size, but still to be nailed down as they develop that program, what's what's the optimal fit.
Speaker Change: And then I guess I can chime in on just how to think about.
Speaker Change: Licensing aspect of it.
Speaker Change: This program is really.
Speaker Change: Driven by Baker, and now Woodside as their first partner in this.
Speaker Change: <unk> and pure license or.
Speaker Change: In the industrial scale platform and so when you think about you know.
Speaker Change: Like what is <unk> role here, yes, we will provide technology support but we are.
Speaker Change: Effectively gone straight to the end state that we would go to at the utility scale right, which is we will sell a license we will earn revenue on that license, but we are not really subject to material capital outflow to get that program or to get facility, though.
Speaker Change: Got it I really appreciate the detail there and then shifting gears a bit to your Mou with carbon terrible.
Speaker Change: Can you speak to the opportunity you see in California for net power plants and at a higher level. How do you expect to use partnerships like this and other agreements ahead of the project Permian startup.
Speaker Change: Yes.
Speaker Change: So the commentary about one I mean, it's a really really exciting one so the seat the CRC folks control a lot of just depleted oil and gas fields in California that have been produced over the last 100 years and now the CRC folks are in possession of close to 1 billion tons of Sidoti surge capacity across their entire acreage position.
Speaker Change: And so we just collectively came together and said Hey, you guys have all the storage capacity you want to fill it up and we have these clean gas power plants that are just carbon capture factories and so if there's a way that we can co locate our power plants above your cotwo storage votes.
Speaker Change: That's quite synergistic to both of our firms as well as to just the state of California, because youre able to provide new baseload power generation state that Hasnt had a baseload power generation facility built in the last decade.
Speaker Change: So there's a lot of really nice attributes about this that makes sense all around and so just part of the scope of what we're doing with the CRC folks right now is really scoping out.
Speaker Change: That first gigawatt of plants that we want to put in California, where do we wanted to go and I think a lot of that is really going to be instructive coming out of this.
Speaker Change: Modular multi plant.
Speaker Change: Pre feed program that Brian and the team are going to be running this year.
Speaker Change: A lot of stuff coming out of that a lot of information coming out of project Permian with the stick build application is going to be pretty helpful and really helping us really understand.
Optimal locations optimal scope for successful projects in other states, but.
Speaker Change: Right now the big focus for this year is wrapping up the <unk>.
Speaker Change: Permian work on the value engineering, and then really getting to work on this multi pack configuration pre feed that the team is going to be doing in those two pieces of information coming out of those is going to be really helpful.
How do we prioritize some of these other areas for the early 2000 <unk>.
Speaker Change: Understood. Thanks for your time.
Ryan Levine: Thank you next question is coming from Ryan Levine from Citi. Your line is now live.
Ryan Levine: And thanks for taking my questions.
Ryan Levine: In terms of the number of research or particularly with human resources pursuing this opportunity has that scaled up or down in recent months both through.
Ryan Levine: Through net power and your strategic partners around developing that technology.
Ryan Levine: Okay.
Ryan Levine: Yes.
Ryan Levine: Thank you.
Ryan Levine: The general answer is we continue to build out the team.
Ryan Levine: If you look at net power as an organization, we added a bunch of films in 2024.
Ryan Levine: A lot of key technical roles, which Brian can get into and then if you just look at across the technology development between US Baker all of our Smes oxy constellation and there's hundreds of people working on this thing on any given day.
Ryan Levine: But I'll, let Brian chime in further yes, no thats right I mean, Zachary has a large team that's only grown same with <unk> on the feed work same with lummus and they're multiple sub supply chain that they are bringing in.
Ryan Levine: Like I said I mean, we've identified where the technology needs are and gaps and built.
Ryan Levine: Built out an incredible team at our company that have expertise themselves an air separation plants heat exchangers turbo machinery.
Ryan Levine: Et cetera, so we've only grown our key.
Ryan Levine: Key partners have only grown and then this also takes let's say dedicated specialty contractors, which overtime. We've identified who are best in class and can fill in any technology or commercial gaps so yeah only been increasing.
Ryan Levine: To this point.
Ryan Levine: Great. Thanks, and then on slide eight you referenced that you're focusing more on U S Gulf Coast.
Ryan Levine: <unk> previously you had highlighted some north MISO opportunities are those no longer being pursued or are those delayed from commercial development opportunities.
Ryan Levine: There is still being they're not being delayed so much rain as it is just I think as we think about slotting of where theyre going to project numbers <unk> 10 going to be.
Ryan Levine: We really want to get to a place where we can demonstrate the lowest still CBOE, we possibly can.
Ryan Levine: That pathway to just broader commercial success and so for US, it's really just about being able to slot things in the order of lowest cost.
Ryan Levine: First right and so just coming out of the Permian feed I think it really indicated to us that being able to pre fabricate and developed things on.
Ryan Levine: On our coastal sort of application is probably where we're going to start now I think when most people think of course, they think of just Gulf coast right, but you also have river river ways waterways.
Ryan Levine: Lake, Michigan for example is a place where you could possibly be on on the coast there.
Ryan Levine: We're not necessarily just relegated to the Gulf coast, but it's obviously a pretty interesting once you start because you have a lot of the.
Ryan Levine: The prerequisite is already in place with the natural gas infrastructure, the cotwo infrastructure the power infrastructure.
Ryan Levine: Well as potential industrial gas infrastructure.
Ryan Levine: To be able to really optimize the value of the <unk> part of this plan. So there's a lot of really nice things about the Gulf coast that make it really attractive to us.
Ryan Levine: And again as everybody knows you know our costs are pretty friendly place for us to be in and so it's an area that the origination team is already starting to poke around on.
Ryan Levine: And then last question for me.
Ryan Levine: In.
Ryan Levine: What are the portfolios in northern Indiana, and selling six they have Sissi U S generation as one of the preferred portfolio is that an opportunity we are pursuing and.
Ryan Levine: The northern Indiana power market.
Speaker Change: Can't comment on it.
Ryan Levine: That specific one exactly but yes I mean.
Ryan Levine: The whole part of MISO is pretty interesting geologically.
Ryan Levine: So hopefully whether it's us or other folks hopefully gets exploited because the rock there is pretty good and again, it's an area that needs as much firm generation as it can get.
Speaker Change: Great. Thanks for taking my questions.
Speaker Change: Thank you. Your next question today is coming from Wayne <unk> from capital One your line is now live.
Speaker Change: Good morning, everyone. Thank you for taking my question.
Speaker Change: I'm just wondering if you could expand a little bit on some of the let's call it commercial activities dialogue with customers.
Speaker Change: And if you wouldn't mind maybe touching.
Speaker Change: Touching on the opportunities up in Alberta.
Speaker Change: Kind of spoken to before that would be great. Thank you.
Speaker Change: Yeah, I mean, we're working to Alberta pre feasibility with with with our partner up there.
Speaker Change: Okay.
Speaker Change: Progressing I think.
Speaker Change: For all of these projects, they're really just following the lead on what we're doing at project Permian and really what we're going to be doing with this multipack pre.
Speaker Change: Pre feed that Brian and the team are running so it just gives me a lot of really good insights and information coming out of those two in.
Speaker Change: <unk> that are going to be really helpful. As we really start to scope out both.
Speaker Change: The project size, but also just the timing of some of these other projects.
Speaker Change: And then just elsewhere on the commercial piece you know, we're talking to the big Tech folks, which isn't a surprise because I think everybody under the Sun at this point.
Speaker Change: So those conversations are progressing, but I think everybody really is focusing on.
Speaker Change: US and what are the long term economics of this plant going to look like how is this going to stack up against nuclear I think there's a whole host of folks that have already started to turn their attention is nuclear is going to be the solution.
Speaker Change: Which is sort of ironic because 100% of what's really getting developed today, that's baseload gas based and I think.
Speaker Change: I think from our vantage point, a lot of people really aren't paying attention to how low cost and reliable clean gas power can be whether it's a solution like manpower some like PCC.
Speaker Change: I think with the design that we have we think it's just going to be a better mouse trap versus versus any of the other alternatives.
Speaker Change: And Theres probably like.
Speaker Change: No better example of it.
Speaker Change: We've seen over the last year, just this massive demand for CCG Ts.
Speaker Change: Before we gas curve really hasnt moved up that much and we will continue to creep up but I think it really just reinforces how abundant and low cost natural gas is here in the United States to be the preferred feedstock for the next generation.
Speaker Change: And so that just gives us a whole lot of comfort that being able to design a gas based solution to provide that reliable power for the grids needs.
Speaker Change: Such a huge competitive advantage, so us having gas based solution.
Speaker Change: For us it is.
Speaker Change: As a huge advantage and I think when when we eventually couple on getting past this sort of near term prime detail to add as much generation as we possibly can obviously <unk> being deployed because it's the most available today off the shelf right, but I think once the industry gets its feet under itself.
Speaker Change: And it can start to actually add.
Speaker Change: Clean reliable generation I think that's really where you're going to see a technology like net power shine and so we do have the benefit of time to ensure that we get it right and sure we get it right not just in terms of the technology working but getting it right in terms of the economics and being able to compete.
Speaker Change: With the covenant, meaning alternative and the other clean alternatives. So.
Speaker Change: We're going to get it right, we're going to take our time to ensure we get it right because I think that's what the shareholders deserve.
Speaker Change: Great. Thank you and any movement internationally.
Speaker Change: Good to hear.
Speaker Change: Uh huh.
Speaker Change: No not really I mean theres areas on the international markets that are really interesting I think.
Speaker Change: Part of the Baker industrial program that they're going to be doing with Woodside, that's a really cool program for the international opportunities, especially on the LNG side. So that's going be a that's going to be a great place for them to take a look at it but for us when we look at just the markets where this plant makes the most economic sense.
Speaker Change: It's a marriage between the U S and Canada is worried that just because of the access to low cost gas and especially here in the U S. A favorable carbon pricing regime with a 45 Q.
Speaker Change: So U S. U S is the best place and that's ultimately where we're going to start the cost down curve exercise and certainly as we're able to get our capex down as we scale this thing into manufacturing mode.
Speaker Change: I'll start and open up some of those international markets, where they may not be such a favorable economic regime for gas based solutions, but yeah, we could like we've kind of said.
Speaker Change: On prior calls we can just sit here in the United States for the next 20 years it will be okay.
Speaker Change: And so while we will eventually expand into some of those other markets, especially on an opportunistic basis.
Speaker Change: Being able to have all of our resources focused in the U S is probably the right thing for the business, but it's also probably the most prudent thing in terms of making sure that we're not spending too much on the G&A side to try to chase too many opportunities.
Speaker Change: Understood. Thank you so much appreciate you taking the questions. Thanks, Mike.
Speaker Change: Thank you we reached end of our question and answer session I'd like to turn the floor back over for any further or closing comments.
Speaker Change: Okay. Thank you everybody for joining us on our call today.
Speaker Change: This is a pretty dynamic market.
Speaker Change: <unk> is a pretty dynamic technology, we're going to continue to adapt responsibly and responsibly to the market's needs.
Speaker Change: And I think today is probably no better example of we need to be nimble, we need to be reactive and responsive.
Speaker Change: With an unwavering focus on the long term vision of delivering low cost clean reliable affordable power. So.
Speaker Change: Appreciate everybody's support I appreciate everybody's long term view and look forward to chatting with you all next quarter.
Speaker Change: Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.