NET Power Inc. Q2 FY2024 Earnings Call

Greetings. Welcome to the NET Power Second Quarter 2024 Earnings Call. At this time all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the call over to Bryce Mendes, Director of Investor Relations. Please go ahead.

Good morning, everyone. And welcome to NET Power’s second 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. Today we issued our earnings release for the second quarter of 2024, which can be found on our Investor Relations website, along with this presentation at ir.netpower.com. During this call, our remarks and responses to questions may include forward-looking statements. Actual results may differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with our business. These risks and uncertainties are discussed in our SEC filings. Please note that we assume no obligation to update any forward-looking statements. With that, I will now pass it over to Danny Rice, NET Power’s Chief Executive Officer.

Thanks, Bryce. And thanks everybody for joining us today. On the call, we’ll reference several slides from our Q2 presentation, and we encourage you to have it handy. It was a productive quarter for the NET Power team as we continue to make steady progress across our three strategic pillars and our 2024 milestones. As we’ve mentioned on previous calls, we’re focused on several key initiatives. First and foremost is commercializing and improving our clean power technology at the utility scale. Our first utility scale plant remains on schedule for startup between the back half of 2027 and first half of 2028. To ensure our first plant performance is designed this fall, Baker Hughes and NET Power will commence the first phase of a rigorous turboexpander equipment validation program at our La Porte demonstration facility. Second, we are building out our project backlog through our origination efforts across competitive power markets in the U.S. and Canada. These originated projects were originally intended to accelerate early plant deployment after Serial Number 1 comes online, but as we’ve seen over the last year or two, the U.S. is entering a period of meaningful load growth that remains well short of new, affordable, clean, firm power resources. The market opportunity for NET Power plants to meet this load growth is something our origination team is actively pursuing. And third, we’re standing up our strategic supply chain partnerships to ensure we have the ability to deploy dozens of these plants per year by the early part of the next decade to meet the growing demand for clean, firm power. Let me spend a couple of minutes on the macro and our competitive positioning before turning it over to Brian and Akash for the operational and financial updates. For the first time in a long time, we are seeing around-the-clock load growth, primarily from continued electrification of everything and new demand from things like data centers. We believe clean 24/7 firm power solutions like ours will break the world’s ability to achieve its energy needs economically without compromising its environmental goals. And as we sit here today and assess the competitive landscape, we continue to see data points and anecdotal evidence that we’re designing the most cost-effective clean power solution in the world. Given the IP moat we’ve built around this business and the decade or so the team has put into developing and refining our clean power plant, we think we should have a meaningful head start through 2040. The supply chain constraints facing the entire power industry, carbon emitting or not, is shifting the market’s focus to 2028 to 2030 and beyond, which bodes well for us to capture this demand as we scale into full-scale manufacturing mode shortly after our first plant is online. In terms of our competitive positioning, we still see NET Power as the most economical clean power solution. For the first time ever, load growth for 24/7 power means that levelized cost of energy, or LCOE, must be assessed on a 24/7 365 basis. We believe our solution will be more economic than new nuclear renewables with long duration energy battery storage, renewables with gas peakers, and gas plants with post-combustion carbon capture. Our early plants will be our most expensive, and for these we’re targeting geographies with our most favorable economics, excellent spark spreads, low cost to sequester the CO2 and robust government incentives. Regions like MISO, Alberta, and certain parts of ERCOT fit the bill. That said, we believe our first plant, which will likely be the most expensive one we ever built, will still be highly competitive with any other clean firm power alternative. That’s a very profound and important starting point. And as we step into manufacturing mode, we are targeting an LCOE of $60 per megawatt hour in many places across North America, which we think unlocks an obtainable market of 800 to 1000 NET Power plants. This $60 includes the 45Q benefit, which amounts to approximately $20 per megawatt hour. On an unsubsidized basis we are targeting $80 per megawatt hour or less. Today, average U.S. power prices are approaching $60 per megawatt hour with unprecedented load growth coming down the pipe. Without sufficient generation capacity being added, we think grid reliability becomes compromised and power prices move higher. Neither of those are great outcomes for consumers, people and small businesses alike, and we’re seeing more tangible evidence across the U.S. of the consequences of underinvestment in large scale firm capacity. Just two weeks ago, PJM’s capacity auction, for example, for 2025 to 2026, experienced a major shortfall in reliable power bidding, resulting in a 9x spike in capacity prices to over $280 per megawatt per day, the highest capacity prices PJM has ever seen. This comes on the heels of PJM and other system operators’ reliability reports indicating there is more load growth than firm capacity being added. All to say, the results of the PJM auctions aren’t a surprise to those following this space. But what is surprising is a disproportionate amount of resources and capital spent performing triage instead of addressing the underlying problem. We also don’t think that forward prices properly reflect the marginal cost of new capacity to meet baseload demand growth. For a new combined cycle gas plant, for example, we’re hearing through the market costs $1,500 to $2,000 per kilowatt range, which is nearly two times the cost of a new gas plant compared to several years ago. That’s consistent with what we’ve been seeing on our side. All to say, inflation across the traditional generation sector really narrows the economic gap between a carbon emitting plant and a clean NET Power plant. Carbon intensity-wise, the U.S. grid today is at around 370 grams per kilowatt hour. NET Power is 40 grams to 75 grams per kilowatt hour. We comply with the EPA’s proposed Section 111(b) and Section 111(d) rules and installing NET Power from here on out in the U.S. would be a 75% reduction in U.S. power emissions while improving grid reliability and ensuring power prices not much higher than where they are today. Just given the underinvestment in firm resources over the last five to ten years, there is a lot of capital and attention on batteries, which is more of a triage for grid reliability than it is a sustainable, low-cost solution. Batteries are inherently very expensive at over $200 per megawatt hour, but by further reducing the economic uptime that a new 24/7 power plant needs to justify being built, batteries only make this problem worse. If the end goal is clean, reliable, affordable power, NET Power is far and away a better, more complete solution. But absent a total shift across policy, capital markets, and market demand, we don’t see firm 24/7 resources being added fast enough, and we think power prices should be moving much higher. This, in turn, will only mean that our plants are more economic thus supporting our commercial strategy to lead with origination and set the table for future deployments where our clean firm power grid can generate highly economic return to the NET Power plant owners while delivering lower cost power than prevailing market prices. On the origination front, we continue to make significant progress across North American markets. Slide 7 highlights the regions we’re spending a lot of our time originating future projects. As I’ve mentioned in the past, there are three main criteria to screen to ensure a NET Power plant’s success. The first is access to natural gas; second is a market or designated market for the power; and third is ample CO2 storage, whether it’s through permanent sequestration or enhanced oil recovery. Now, there are multiple regions across North America that check these three boxes, in addition to having supportive policies that further enhance the economic attractiveness of these prospective plants. As we’ve mentioned before, there are approximately 22 states in the U.S., plus several provinces in western Canada that contain sedimentary rocks for geologic sequestration. Most of these territories happen to be in competitive power markets, which is where we are focusing most of our origination efforts today. You can see on this slide where our team is focusing their efforts. One of the more interesting markets is Alberta, which has the right elements for success, and we believe could be one of the most attractive places in the world for us to establish some large-scale NET Power clean energy hubs. We’re currently in the project feasibility phase of the origination timeline here, which includes conducting site-specific studies with our first partner in the region, commencement of a region-specific plant design, and initiating regulatory dialogue at both the provincial and federal levels. We are really excited about the Alberta market and look forward to sharing our progress going forward. Elsewhere, our northern MISO project is progressing well. As a reminder, we filed our MISO interconnect application in the second quarter of 2024. Additionally, our sequestration partner has filed for its Class VI CO2 sequestration permit. With these items underway, we’ve begun the first phase of stakeholder engagement at the local and state levels. On a final note, before turning it over to Brian, I am excited to announce that NET Power officially opened its Houston office in July. We look forward to continuing to grow the NET Power team down in Houston, which has long served as an epicenter for energy industry talent. I will now hand it over to Brian to give an operational update.

Thanks, Danny. Turning to Slide 9 in the presentation, as we have mentioned in previous calls, the upcoming testing campaigns at La Porte will focus on validating and de-risking the Baker Hughes utility-scale turboexpander and optimizing its operation within our cycle. The campaigns will follow four primary phases and will continue through 2026. We’ve added the expected timing for each of the four phases on the right-hand side of this slide. The first phase of testing, which will result in combustor burner down-selection, is on schedule to begin in the fourth quarter of this year. The second phase is expected to begin in 2025 and will take the selected oxyfuel burner from Phase 1 and test it alongside a combustion liner and other hardware to form a single demonstrator sized combustion can. The third phase of testing is expected to begin in late 2025 or early 2026 and will involve scaling the demonstrator size combustor can from Phase 2 to utility scale can with clusters of burners and then testing it with the goal of learning and optimizing the design of the utility scale combustor that will operate at Project Permian and beyond. Finally, the fourth phase is expected to start in 2026 and will test the full demonstrator turboexpander, including the validation of materials and design architecture to be used on the turboexpander for Project Permian. Turning to Slide 10, the team continues to make steady progress on site upgrades to our La Porte demonstration facility in preparation for our upcoming equipment validation with Baker Hughes. To support Baker’s combustor test requirements, we have added additional natural gas oxidant and CO2 piping that runs to our combustor test rig building, which will host Baker’s combustor test rig. Based on lessons learned from NET Power’s previous La Porte testing, we have installed upgraded flow measurement and other instrumentation to enhance our data acquisition that will ultimately help us improve our utility scale control system. We continue to bolster NET Power’s engineering team and our partner Constellation’s site operations staff ahead of the Phase 1 equipment validation set to start in the fourth quarter of this year. The Baker Hughes combustor test rig is shown on the right-hand side of Slide 10. It is currently located at Baker’s Florence facility and is expected to ship to La Porte in Q3. Due to the plant upgrades we are making, we can vary the pressure, temperature, and flow of the CO2, oxidant, and natural gas that feed the combustor test rig to simulate the range of operating conditions that Baker expects to see in the actual turboexpander. Phase 1 testing will commence in Q4, beginning with ignition testing and ending when we and Baker have operated each of the candidate burners through a full range of operational mapping and have made a final down-selection. Phase 2 will begin next year using the selected burner and will test a La Porte sized combustor can. Next, I will turn to Slide 11 for the update on Project Permian. The project remains on schedule with initial power generation expected to occur between the second half of 2027 and first half of 2028. During the second quarter of 2024, we signed a limited notice to proceed with Baker Hughes for the release of all long lead material required to maintain an on-schedule delivery of the utility-scale turboexpander to Project Permian. Our key upcoming 2024 milestones are highlighted on the right-hand side of the slide. We are advancing our Front-End Engineering and Design or FEED with Zachry Group. We recently met with John Zachry and his leadership team to discuss the court approved settlement between his company and the Golden Pass LNG project. We had a constructive dialogue and are pleased that we will continue the same EPC contracting approach we initially envisioned when we started the FEED. Zachry continues the FEED engineering to firm up equipment quotes and optimize the plant layout. We have had several collaborative value engineering sessions to optimize the piping design and reduce the amount of CO2 volume in the system and reduce the quantity and cost of high-pressure pipe. Zachry will deliver their FEED estimate and schedule expected in Q4 of this year. To maintain the project schedule, we will continue to order long lead components throughout 2024. We and Zachry are finalizing purchases for other long leads that have been identified, including 345kV circuit breakers, a generator step-up transformer, a unit auxiliary transformer, and an air separation unit transformer. Other items may be added to this list as necessary to ensure we preserve the Project Permian schedule. Additionally, we recently finalized our ASU pre-FEED and have begun our ASU FEED with a standard 2 x 50% ASU plant configuration. Instead of a single large ASU unit supplying all of our required oxygen, there will be two smaller ASUs that will together account for the full oxygen input requirements for the plant. The two smaller ASUs have better operating flexibility to support our various power plant operating modes including ramping up and down to support grid requirements and optimizing liquid oxygen storage to serve as our backup oxygen supply and long duration power storage. This ASU configuration decision was carefully made considering the trade-off of many factors and ensures success for both Project Permian and other future projects. Many of our target customer geographies are located inland away from major ports and waterways. This decision will better support truckable module shipping to a diverse range of customer project sites. This 2 x 50% configuration is also a better fit within ASU providers' standard product offerings and should support modularization and a broader set of competition amongst their sub-suppliers for equipment like compressors and heat exchangers. With that, I’ll pass it off to Akash for the financial updates.

Thanks, Brian. NET Power continues to prudently deploy our capital, ending the second quarter of 2024 with a strong balance sheet including approximately $609 million of cash investments. Consistent with the past several quarters, the current interest rate environment has allowed us to put our balance sheet cash to work to offset our corporate spend. In the second quarter, our cash flow used in operations was approximately $8 million, which included a cash payment of more than $3 million under the Baker Hughes JDA. We expect cash flow used in operations to continue increasing as we build out the organization, progress the joint development program with Baker Hughes, and ramp up activity at La Porte. For the quarter, our total capital expenditures were approximately $8 million, comprised of approximately $4 million of capitalized costs associated with ongoing Project Permian development activities and approximately $4 million spent on La Porte modifications and upgrades ahead of testing that is expected to begin in the fourth quarter of this year. NET Power’s fully diluted share count was approximately 249 million shares as of June 30. This was comprised of approximately 214 million Class A and B vested shares, 19.5 million shares issuable upon the exercise of outstanding public and private warrants, which if exercised would give NET Power an additional $225 million of cash, 2.9 million shares subject to earn outs or vesting requirements, and approximately 12.4 million authorized shares issuable pursuant to the joint development agreement with Baker Hughes. For a detailed breakdown of our diluted share count, please refer to our annual and quarterly financials on file with the SEC. That concludes our prepared remarks. I’ll now pass it back to the operator to open up the line for Q&A.

Thank you. We’ll now be conducting a question-and-answer session. Our first questions come from the line of Leo Mariani with ROTH. Please proceed with your questions.

Yes. Thanks. Just a quick question. I wanted to follow up a little bit here on Project Permian. You spoke to this in your prepared remarks, but do you envision any change at all in timeline as a result of Zachry’s financial issues? You mentioned there are going to be some deliverables on the FEED side later this year. But as you look at the overall timeline in the next year or two, do you not see any change? I mean, was there any change in terms of staffing that was being supplied to your project there? Can you speak a little bit more detail about that? That’d be great.

Yes, Danny, I’ll take that. This is Brian. Yes. So, there’s been no impact to the FEED the whole time this was going on. We’re actually embedded in their office with our project team. No change to staffing. No change at all. So really – again, we’re not in the EPC phase yet, so it’s really mainly engineering taking place. But our meeting was really more about forward-looking ability to contract the subcontractors, ability to make the purchases, ability to attract the staff in that future phase, and that’s fully in place. So, yes, no change in schedule, no slip of any sort, and the FEED has progressed per the original schedule.

Okay. That’s helpful. And then I wanted to jump over to OP1 real quick here. So, you mentioned that you guys have a sequestration partner lined up for that. Was hoping that you could provide a little bit more detail around that in terms of who that might be. And then I guess, just additionally, where are you guys in the process of maybe kind of selecting the right customer for that project?

Yes. Leo, this is Danny, and good to hear from you. Yes, I think without getting too deep in the weeds on specifics of who the partner is, I think one of the things is we’ve started to dive deep into just these origination projects, lining up both partners on the power side, but then also on the subsurface side. I think one of the things that I think everybody in this space is seeing is on the subsurface side, you’re really looking at the traditional energy industry folks with that subject matter expertise. So traditional oil and gas companies that are very, very familiar with just understanding geology. More importantly is you get into whether it’s in Northern MISO, Southern MISO, ERCOT, CAISO, there’s subject matter expertise across just local geologies in each of these areas. It’s really finding partners that have deep experience, not just with the ROC, but also with being able to work with the permitting agencies with the states, with the local communities. With this Northern MISO project, it’s not a company that’s from outside the basin. It’s one that’s been in the basin for a while now, which certainly gives us a leg up in really understanding just both the regulatory process and to the point I made earlier on engaging with the local communities and local stakeholders. It really is a huge advantage as you look at just being able to build that social network there. So, things are progressing nicely there and then, happy to hear that second question again, if you want some color there.

Yes. No, that was very helpful in terms of the color around the sequestration partner. Was just curious as to kind of where your conversations are with a potential power partner. I don’t know if you’ve maybe kind of narrowed down some options. I mean, are you maybe started with a wider funnel and talked to a bunch of folks, and now you’ve got to narrow down to a handful of partners? Just trying to get a high level sense of where you are with potential customer engagement on OP1.

Yes. The power piece is such an interesting one because I think when we originally started getting into the origination space, we sort of just assumed that the most logical place to sell this power is into the local merchant markets or under a long-term PPA. But all that’s really done through a utility that would become a partner of ours in our origination projects. I think one of the benefits of us doing origination, it gives us total creative latitude over how do we commercialize this, how do we structure each of these, for all intents and purposes, SPVs that we put around these NET Power clean energy hubs. We kind of have total latitude over who do we want to partner with. Is it going to be the traditional utility folks in a given region? Is it going to be bringing in infrastructure capital and we stand up the team or partner with somebody on the actual operation of the plants? I would say sitting where we are today, it really varies from region to region. And I think the new dynamic that’s really just popped up is the load growth and just power demand that you’re seeing from new sources of generation, that this is really data centers that have this insatiable appetite for as much clean firm power as they can get their hands on. Obviously, clean firm power is in very, very short supply today and certainly going forward to meet their needs. For us, this creates really unique opportunities to underwrite plants with these long-term fixed price PPAs at really healthy prices if you can put these plants in the right area, right? Certainly, this first origination project in Northern MISO is one of those targeted areas for folks looking to procure power on either a physical basis or as a bridge until you can establish these permanent behind-the-meter solutions, virtual PPAs. A long way of saying is, we have a lot of options with what we do with OP1’s power, but it’s really nice to see a lot more options and a lot more flexibility starting to pop up than we expected even 12 months ago.

Good morning, gentlemen. Thanks for taking the time. A couple for me on Baker supply. Just kind of thinking through gas turbine demand globally, not just for NET Power turbines, but the build-out of peaker plants, etc. How do you think about the surety of your turbine supply with Baker in this growing demand environment? And is there room to expand that capacity? Just kind of walk us through some of the color around the supply agreement to the extent that you can. Thanks.

Sure, Thomas. This is Brian. I think I addressed this a little last time. Certainly, they’re seeing – yes, Baker’s seeing the pressure from the aviation industry coming out of COVID, you have significant amounts of airplane and jet engine orders, which compete for a similar supply chain. And then of course the power gen itself picking up. Overall, that’s a much smaller percent of just the total supply chain for things like forgings and castings that make up the components within the turbine. Look, we have a commercial committee partnership with Baker. We’re looking at long-term forecasting and this is their business, right? They make sure as we go through the design that they’re not sole sourcing individual sub-suppliers. This is what they do day in, day out. So, we’re confident, having worked with them on the sub-supply chain, that they’re securing and they’re leaving themselves options. We’re not designing something that trends off into one of a kind type designs or material sub-suppliers. Yes. So, it’s really just enhancing who they already work with. It’s a similar supply chain and yes, we’re confident in what they’re building out right now.

Great. Thank you. And then Danny, on the heels of Leo’s question on OP1, just wanted to ask this kind of the same question in a different way. But is there any change to your strategy for monetizing originated projects as it relates to PJM capacity clear MISO capacity reform? All of these things that have generally tightened the market for clean firm power. Just curious if you still expect that the vast majority of OP projects will be monetized via promote or a sale or if there’s an opportunity for you to operate them yourself.

Yes. We talk about that all the time, like, do we get into the operator game? I think kind of sitting here today, we don’t necessarily think we need to internalize that skill set. Certainly, we’re sitting in a unique position where there’s probably nobody in the world that understands this technology better than us because we’re developing it. Nobody really understands the operability of this plant better than us. It’s certainly a skill set that we have a head start on everybody with. It really comes back down to, like, what’s going to enable us to scale this thing as quickly as possible? Is that going to be a responsibility that we can outsource to other folks? I think as we look at origination, our original goal was, look, origination for us is going to be a way to catalyze us into full-scale manufacturing mode. The goal was originally to build a shadow backlog of 30 to 40 NET Power projects that we kind of have teed up going through the requisite grid and subsurface permits for the first 30 to 40 plants by the time the first one comes online at the end of 2027. That’ll really catalyze us into manufacturing mode, and it allows us to come down that CapEx curve. We can take our CapEx from $1 billion, $1.1 billion down towards that $700 million that we’re targeting long-term. Looking at just the interconnect queues, this load growth, looking at the higher values that are now being ascribed to firm power, it shows up in capacity markets like what you saw in PJM. There’s major scarcity just new firm capacity being added. It’s hard to contract any type of firm capacity under a long-term PPA. If you have clean, firm capacity, that’s highly, highly valuable to a whole lot of potential strategic buyers on a long-term basis. This enables us to underwrite a lot of CapEx, if not the entirety of the CapEx of these plants with long-term PPAs coupled with the benefit of the 45Q, which is a 12-year fixed price PPA with inflation escalators in it. This unique place enables us to underwrite the full returns of the plant on a fully contracted basis. There’s a breadth of load that’s going to be coming to these grid systems. It really lends itself to these fleet deployments. So, origination for us could evolve beyond just catalyzing us into manufacturing mode and really become a core staple of the business of NET Power.

Good morning, everyone. Thank you all for taking my questions. I think last quarter, just to follow-up, I believe on Leo’s question earlier, I think last quarter you all mentioned that there might be another project that potentially sort of slots in ahead of this OP1 as we know it today. Considering the MISO and Class VI filings, is that still possible or are we sort of at the point of more certainty and then just in terms of timing, still fair to think of OP1 starting up within a couple of years of Project Permian?

Yes. Hey, Wade. Yes. The way we kind of think about it with origination and the reason why origination just gives us total flexibility is because these are our projects and until we’ve brought in strategic partners on the equity side, on the debt side, on the offtake side, we kind of have total flexibility around slotting order and sequencing of these plants. Certainly, OP1 is kind of ahead of these other originated projects because we’re already going through the permitting, we already have site control, all those things for this to be an actionable project. We’ve kind of always said, we’re going to try to develop the most economic projects first. As we’re looking at opportunities in some of these other regions, there’s definitely the opportunity that some of these other things could slot in ahead of it if the timing works out and the permitting falls into place. One market that could surprise people is Alberta, which is probably the most economic place in the world to develop a NET Power project, principally because of the ITC credits you have at the federal and at the provincial level within Alberta, and a favorable carbon tax pricing regime. Alberta has been highly successful in permanently sequestering CO2 through a lot of nice geologic formations over the last few years. That market could leapfrog what we’re doing in the MISO area. After the first plant comes online at the end of 2027, we’ll quickly ramp into full-scale manufacturing mode and the expectation is to deploy dozens of these plants. We’re excited about having total optionality over which project we slot as Serial Number 2.

Fantastic. Appreciate that. Great detail. You framed this earlier, actually. Sounded like a very attractive market developing up there in Alberta. Any hints you can give us? I think I heard you say you have secured a partner already up there. Did I hear you correctly? Any color you can give on that would be fantastic.

Yes. We’re working with a few firms up there that have really great access to natural gas and CO2 storage. The key things are figuring out how am I going to get access to the lowest cost gas I can? How can I get as close to the CO2 sink as possible to minimize CO2 transportation and sequestration costs? In Alberta, just like any other area, the power piece is probably the easiest one to solve. The power market is short firm clean capacity, and everybody is really scrambling to procure that generation capacity. So, we’re working closely with several firms on these opportunities. Certainly, as those evolve and become announced, we’ll share more details. Alberta is a really interesting one for a lot of the same reasons why some of the markets in the U.S. are exciting to us as well.

Good morning. I was wondering if you could maybe give us an update on your approach to financing the Project Permian plant. Any update regarding DOE potential funding timelines, etc.

Yes. Hey, Marty, thanks for the question. This is Akash. We’ve said this on previous quarters, so we’re waiting for – there’s a lot of things that have to align before you announce the final financing package for the first plant. We’re going through FEED now right on the end of FEED in Q4, we’ll get an open book estimate. So we’ll have the firm CapEx number. That will allow us to know the actual specific returns of the plant based on supply offtake and others that we’re in discussions with in West Texas. We are the first $200 million into the plant. We’ve announced that, right, of our $600 million plus cash; we’re going to be the first $200 million into the plant. We’re working on the financing strategy with our existing owner group led by Oxy, Baker, and Constellation for how we approach the rest of the capital for that. We also have said that the first plant, we’re approaching this as fully equity funded at the project level. There may be opportunities for us to procure either federal or state level capital, and we are evaluating that. The DOE program for the LPO is a great opportunity for anything in Serial Number 2 plus, like in myself. Other opportunities in Texas are also continuously evaluated, including the Texas Energy fund. As of now, we’re assuming it’s fully equity funded.

Great. For my follow-up question, I wanted to ask about brownfield site opportunities. Are you seeing any opportunities to accelerate originated projects?

Yes, definitely. I think greenfield, brownfield. Brownfield are just existing sites. So, yes, brownfield sites are really interesting to us for several reasons. They already have existing interconnects. What you’re doing is really just powering existing interconnects. If you look at the thermal power industry over the last 10-15 years, you’ve seen capacity rates on base load plants go from them serving as base load 80% to 90% capacity factors. Now they’re trending down towards 50% or 60% on average. Many of them are relegated to peakers, operating only when needed. Those sites with interconnect are underutilized, creating opportunities for us. It’s part of our screening assessment for origination. I wouldn’t say it’s necessarily in the top three or four things we’re looking at as we screen for the best place to put these plants. Our plant is highly dense; we’re talking 15 to 20 acres for each of these blocks. If four NET Power plants yield a gigawatt, we only need 80 acres.

Yes, thanks for taking the question. Nice to be on your call for the first time. You touched on permitting in some of your remarks. We’ve seen many different infrastructure projects get delayed because of permitting over the last few years, specifically in the U.S. Can you just discuss how that aspect of the roadmap is going and do you envision any delays on that front?

Yes, Pavel, no, that’s a great question. I think that’s certainly one of the issues that the broader power industry has faced is building new transmission and infrastructure to connect generating assets. I would say what’s unique about NET Power is we don’t take up a lot of land. If you look at the transmission issues with wind and solar, those folks need many acres to build their generating facilities, which means they often build far away from existing transmission lines. Our situation is different; we can find 20 to 100 acres close to existing transmission lines without congestion on the system. This is certainly part of our screening assessment as we look at where to set up shop. The other permitting consideration is on the subsurface side, regarding CO2 infrastructure. We target being as close to the sink and the grid as possible. In an ideal scenario, we’re right next to the grid interconnect and on top of a sink. We look at permitting and feasibility studies accordingly, understanding that delays exist across the industry but strategically placing ourselves where those delays are minimized.

Let me follow-up on another aspect of policy risks. Obviously, 45Q got benefits from the Inflation Reduction Act and we are about 90 days out from the election. There is debate over whether the IRA will survive in its current form if there is a second Trump administration. What’s your thinking around that issue?

There’s only so many things that we have control over. Who knows what any administration is going to do? I would say if there’s a technology that can survive administrative changes, it would be NET Power and the 45Q for sequestration. It helps us meet energy needs while leveraging the traditional oil and gas industry for natural gas and CO2 sequestration. Few technologies cut across party lines like NET Power can, satisfying both energy goals with affordable energy and achieving environmental goals. If a technology could survive changes, it would be NET Power.

I agree with everything that Danny said, Pavel. I would also add that 45Q was enacted under Obama; it was set to expire in 2023. The Trump administration extended it. There’s precedent for supporting 45Q. When it was increased from $50 to $85 per ton under the IRA, it was taken from the GOP bill. This has strong bipartisan support.

Hi. Good morning. Just had a couple. Going back a little earlier in the call, I was surprised to hear you comment on oil and gas companies and that where you’re looking for sequestration partners, they are typically going to be local companies. Is there any interest being expressed for sequestration projects by legacy energy companies? Just wondering if they’re investing outside their home base, looking at the 45Q and just doing the math and thinking they’ll branch out?

We’ve seen more companies being spun up focused on sequestration. In most of these territories, you have folks already with local geology expertise. Many of these teams have been spun up with the understanding of CO2 sequestration. You’re starting to see them go into these other territories with their land team to procure acreage positions. Those folks who have deep EOR experience are applying it to permanent geologic sequestration. More teams are getting involved in all parts of MISO and PJM. This is a critical market for us as it’s the largest competitive power market in the U.S., constrained by new capacity additions. We’re seeing good geology-based teams working on delineating the sequestration resources, which is really important for companies like us.

I just wanted to ask you, with utilities you’ve talked with in the origination process, they must run the spectrum between those more aggressive with wind and solar and those that haven’t made much investment yet. Those without intermittency problems may not have as strong incentives. As you talk with them at different investment levels in alternative generation, what patterns do you see in their thinking and decision pace?

I can’t provide too much on specifics, but generally, lots of utilities are deeply interested in seeing NET Power succeed. Many utilities see other power solutions as cost prohibitive compared to current power prices, and they’re looking at clean firm options like ours. Our technology is all new, so we need to be deliberate with the Baker testing at La Porte ahead of the first plant coming online. The industry watches closely as we develop these solutions, and I think we’re in a favorable position to address their needs going forward. Thanks everybody for joining us today. It’s becoming really clear to us that our value creation will be determined less by our competitiveness versus alternatives. Our clean power solution will inherently be lower cost and more reliable in the market today versus those coming on the pipe. We really see our success will be determined by our ability to prove our technology at utility scale. Thank you for your support in helping us make that happen. Have a good day.

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.