Earnings Call Transcript - NPWR Q3 2024

Operator, Operator

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

Bryce Mendes, Director, Investor Relations

Good morning and welcome to NET Power's third quarter 2024 earnings conference call. With me on the call today we have our Chief Executive Officer, Danny Rice; our President and Chief Operating Officer Brian Allen; and our Chief Financial Officer, Akash Patel. Yesterday, we issued our earnings release for the third quarter of 2024, which can be found on our Investor Relations website along with this presentation at ir.netpower.com. During this call, our remarks and responses to questions may include forward-looking statements. Actual results may differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with our business. These risks and uncertainties are discussed in our SEC filings. Please note that we assume no obligation to update any forward-looking statements. With that, I'll now pass it over to Danny Rice, NET Power's Chief Executive Officer.

Danny Rice, CEO

Good morning everyone, and thank you for joining us. The team has some positive updates to share today. As in previous calls, I will provide some introductory comments before handing it over to Brian and Akash for the operational and financial updates. We remain focused on developing and enhancing our technology at the utility scale, starting with the validation testing by Baker Hughes at our La Porte facility. We have recently initiated Phase 1 of our equipment validation program with Baker at La Porte, which will lead to the selection of the oxy-fuel burner. I want to express my gratitude to our site team and operational partners for their hard work in reaching this milestone. This achievement is a crucial step toward advancing our technology at the utility scale, and we look forward to continuing our planned four-phase testing program with Baker Hughes through 2026. We are pleased to announce the selection of Air Liquide as our air separation supplier for Project Permian FEED, a significant milestone for our team. The air separation unit is a key component of the NET Power plant, and we are committed to collaborating with the Air Liquide team on Project Permian and future opportunities as we advance our standardized NET Power plant design. Additionally, we held an Investor Day in early September where we presented a recent market study conducted with the Boston Consulting Group. The potential for 24/7 low-carbon energy is substantial, and in our targeted North American competitive markets, we see the opportunity for up to 2,000 NET Power plants, particularly in areas with adequate CO2 storage and infrastructure. This opportunity exists even before we consider entering regulated markets with utilities. We believe that by leveraging clean, affordable, and abundant natural gas, NET Power represents the most cost-effective and quickest option to deliver clean, reliable power. We are committed to executing our strategic priorities to capitalize on this massive opportunity in North America. On the market side, we maintain our belief that there will be a shortage of clean baseload power globally, positioning NET Power to be among the first to deliver a proven and scalable clean power solution. Recently, we have seen announcements from tech firms involved in early-stage nuclear projects; however, load growth will not wait for a decade for new generation solutions to be validated. With Project Permian expected to start operations in 2027/2028, we are well-positioned to capture a significant share of this demand almost a decade ahead of other potential solutions. Moreover, we are not just entering the market sooner but doing so with solutions that are uncompromising. One of the major challenges the grid faces is managing the growing demand for clean baseload power alongside the need for flexible peaking power. Currently, there is no existing solution that can address both needs simultaneously, but our oxy-combustion cycle is uniquely positioned to do so. We are making significant progress on advancing our oxygen-based storage, which acts as a battery for our air separation unit’s auxiliary load. Our oxy-combustion process uses oxygen to generate clean power, and by storing excess oxygen on-site, we can utilize this oxygen instead of relying solely on the air separation unit, which enhances our net electric output. This ensures that the data center complex consistently receives its 24/7 power while the grid benefits from the peaking power generated by our oxygen-based storage. In terms of capacity, a day's worth of stored oxygen amounts to 1.2 gigawatt hours, and dispatch capabilities can range from 15 megawatts to 80 megawatts. We believe this presents a substantial energy storage potential that could be more cost-effective than conventional battery storage. In our commercial discussions, the initial reaction to this hybrid application has been exceedingly positive, and we plan to integrate it into many of our future projects. We will also incorporate a small oxygen storage system at Project Permian to validate this application. While the future of clean energy will certainly include various technologies, it's essential to emphasize what NET Power is concentrating on today. We are actively advancing discussions regarding financing and supply offtake for our first commercial-scale plant, Project Permian, in line with current market pricing conditions. Achieving financing and operational readiness for our first utility-scale plant will significantly impact the world and drive future fleet deployments. Meanwhile, we continue to advance on the origination front. Our origination strategy allows us the flexibility to determine how we commercialize our technology and shape the financial and operational terms for future NET Power clean energy hubs. We are building a substantial shadow backlog of projects by addressing early-stage development work now, so when our first utility-scale project becomes operational, we have clear visibility on the next set of originated hubs, each capable of supporting two to 20 NET Power plants. At our first originated project in Northern MISO OP1, we are actively participating in the MISO interconnection process while moving through site and permitting stages. Our interconnection there is designed for 300 megawatts, allowing power from the initial plants to support the grid with reliable clean energy, while future plants can connect for peaking power, serving co-located loads from data centers. We are in an area we believe has the potential for significant CO2 storage capacity for multiple NET Power plants. In Alberta, we have recently signed a memorandum of understanding with a local partner and are jointly moving through the project feasibility phase. Alberta is quickly emerging as a key area for data center expansion due to its favorable ambient temperatures for cooling, proximity to low-cost natural gas for energy, and supportive industry and regulatory environment. In the U.S., we are pursuing several memorandums of understanding in the western states to establish NET Power hubs, again combining the need for clean power to boost grid reliability with co-located power for data centers. This technology meets the demands of the modern world, and we look forward to sharing more details on these opportunities when the time is right. In response to the election, we are on the verge of commercializing a groundbreaking solution that both sides can support—one that the power sector seeks to succeed and that the tech industry needs to fulfill its clean energy requirements. We anticipate collaborating with the new administration to promote the widespread commercialization of our clean, affordable, and reliable power solution. Now, I'll turn it over to Brian for the operational updates.

Brian Allen, President and Chief Operating Officer

Thanks, Danny. I would like to echo Danny's sentiment and congratulate our La Porte team and our partners that have worked tirelessly this last year to upgrade the facility and begin plant and combustor test rig commissioning for Phase 1 of the Baker Hughes validation campaigns. Thanks to the Baker Hughes team and thanks to Constellation's site staff and leadership team that supported us. Together, we managed a set of highly skilled contractors and crafts that worked over 140,000 hours to complete these upgrades, all while working safely with no recordable injuries. They installed several new pieces of major equipment, welded over 2,000 feet of stainless steel piping, and installed approximately 80 new instruments and over a dozen new valves to improve the facility's operational flexibility for the upcoming campaigns. It is worth noting that while the initial validation campaigns are targeted towards Baker Hughes combustion system, NET Power will benefit immensely from the overall plant's operation. We have incorporated lessons learned from prior testing, not only in the physical facility design but in the control system and the way we collect and utilize our plant data. The additional plant data will allow us to further improve our plant operations and to calibrate our process simulation models that were the original basis of the plant design. Our goal is to develop highly accurate digital twin virtual models of our demonstration plant at La Porte and our utility-scale plants like Project Permian. We can then apply AI machine learning algorithms to the digital twin to help our engineers more rapidly improve our plant design and performance. Turning to slide 10. The operations team is executing on schedule against our highlighted equipment validation campaigns with Baker Hughes. The first two phases of equipment validation are being conducted in a Baker Hughes combustor test rig, shown on the bottom right of this slide. The test rig was assembled in Baker Hughes' Florence, Italy facility and installed in the NET Power and La Porte demonstration facility during the third quarter of 2024. We recently commenced commissioning of the first phase of Baker Hughes equipment validation at La Porte on schedule. This first phase will ultimately result in the down selection of the combustor burner that will be used in future validation phases at La Porte as well as Project Permian and beyond. In the past couple of weeks, we have been flowing CO2 and oxygen streams through the test rig and dialing in the upgraded plant equipment and controls to ensure the conditions required by Baker Hughes specifications are being achieved. It is great to see the plant operating as intended and embarking on this multi-year campaign. Upon successful completion of Phase 1 testing, we will roll into Phase 2, taking the selected oxy-fuel burner and testing it alongside a combustion liner and other hardware to form a single demonstrator size combustion can. The next slide shows some of the Baker Hughes hardware currently in manufacturing in Florence or at their suppliers' facilities. As we have mentioned in previous communications, the Baker team is dual tracking the development of the demo scale turboexpander for La Porte and utility-scale turboexpander for Project Permian. The left-hand side of this slide shows some of the demonstrator turboexpander components including a single bucket also known as a blade, a nozzle segment also known as a guide segment, and the casting of their primary outer casing that will house the combustion cans. On the right-hand side, you can see the utility-scale turboexpander's external casing, along with a simplified 3D utility-scale turboexpander model. It is great to see hardware in production to meet our Project Permian schedule and demonstrates the concurrent engineering approach that NET Power and Baker Hughes are taking in our turboexpander joint development program. On slide 12, we provide a few updates on Project Permian. We remain on track for initial power generation in the latter half of 2027 to the first half of 2028. Yesterday, we announced our selection of Air Liquide as the air separation unit supplier for the Project Permian FEED. Air Liquide has been an outstanding partner for years at La Porte where their adjacent ASU facility supplies us industrial gases and other services. We are excited to continue our relationship with a company that shares our values of technology innovation and focus on sustainability. Regarding the ASU design, we are progressing the FEED for 2 x 50% configuration for Project Permian. This configuration entails construction of two separate adjacent ASUs, each one delivering approximately 2,000 tons per day of oxygen to meet our total requirements of approximately 4,000 tons of oxygen per day. ASUs of this smaller size are easier to transport to Project Permian and the majority of the sites we anticipate building NET Power plants. It is also a more prevalent size in the industrial gas industry and will allow us to leverage a more robust supply chain as we scale into manufacturing mode in the future. During Q3, we publicly announced the signing of our third Limited Notice to Proceed with Baker Hughes for a total of approximately $90 million of purchases for long lead materials required to meet the schedule for the utility scale turboexpander and related key process equipment. Additionally, to preserve our schedule, purchase orders were placed for identified long lead electrical equipment denoted here on this slide. The FEED for Project Permian with Zachry Group remains on schedule to conclude in the fourth quarter of this year, which will include the cost estimate, schedule and overall plant design deliverables for the project. Moving into next year, we plan for Zachry's engineering team to roll out of the FEED phase and write into continued engineering work with substantially the same team. This work will include detailed design, value engineering where feasible and not impacting schedule and incorporation of Air Liquide's ASU FEED into the overall plant EPC contract. We are underway with Zachry preparing the contract and execution plan for the kick-off of the EPC phase and beginning of construction for the second half of 2025. I will now pass it to Akash for the financial updates.

Akash Patel, CFO

Thanks, Brian. As mentioned in Brian's comments, Zachry's estimating team is hard at work preparing the total cost roll-up for Project Permian which we expect to receive in December. This initial estimate will be subject to review and negotiation prior to the EPC contract being executed. Similar to other market participants, we expect to see continued inflation in capital equipment and construction costs compared to our previously provided guidance of $1.1 billion for Project Permian. Importantly, we also expect this inflation will be offset by the continued improvement in the market price for clean, reliable power. We are in active negotiations for Project Permian's key supply and offtakes and look forward to sharing more information as they are finalized. Additionally, we continue to work with our existing owner group on the capital formation for Project Permian which we expect to finalize after the FEED conclusion and supply and offtake agreements. Moving to slide 14. NET Power continues to prudently deploy our capital ending the third quarter of 2024 with approximately $580 million of cash and investments. In the third quarter, our cash flow used in operations was approximately $8 million which included a cash payment of approximately $5 million under the Baker Hughes joint development agreement. As mentioned previously, we expect cash flow used in operations to continue increasing as we build out the organization progress the joint development program with Baker Hughes and ramp up activity at La Porte. For the quarter, our total capital expenditures were approximately $22 million, comprised of approximately $10 million of capitalized costs associated with ongoing Project Permian development activities and approximately $13 million spent on La Porte modifications and upgrades ahead of testing. NET Power's fully diluted share count was approximately 249 million shares as of September 30. This was comprised of approximately 215 Class A and Class B vested shares, 19.5 million shares issuable upon the exercise of outstanding public and private warrants, which if exercised would give NET Power an additional $225 million of cash, 2.7 million shares subject to earn-outs or vesting requirements, and approximately 11.5 million authorized shares issuable pursuant to the joint development agreement with Baker Hughes. For a detailed breakdown of our diluted share count, please refer to our annual and quarterly financials on file with the SEC. That concludes our prepared remarks. I'll now pass it back to the operator to open up the line for Q&A. Thanks.

Operator, Operator

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

Thomas Meric, Analyst

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

Danny Rice, CEO

Yes. Hey, Thomas, this is Danny. Good to have you on today. I think I'll cover sort of just like the economic proposition and then Brian can cover some of just the technical operational nuances of it. I think as we look at Project Permian, the first plant, it's going to be the first of a kind, the most expensive plant we have ever built and it's going to be a single unit. I think as we look at just getting down the cost curve, the CapEx curve for all future plants, those capital improvements are really going to come from a combination of just getting into manufacturing mode and deploying more of these plants, along with continuous improvement and iterations from one generation to the next. But we really do see that the largest cost savings in terms of overnight cost of a new NET Power plant is really going to come from being able to deploy multiple plants together in a fleet configuration. So I think like the nice thing for us sitting here today is not only is it more economic for us to deploy multiple plants together, but it's also what the market is looking for in terms of just new load growth. And not just load growth across an entire region, but load growth at a concentrated site where one location could see demand for a gigawatt or a couple of gigawatts of power. And so what we're really doing now on the origination side is it's really increased that filter level of the scope and the size of the sites that we're looking for are becoming a little bit bigger. I think the nice thing for us is we're starting with such a small footprint. We're talking about 15 acres for each of these plants. And so we're really now starting to look for locations where we have 100 or 200 acres of land, which is not a lot of land, especially when you compare it to the other clean alternatives that need a couple of thousand acres. So we're talking about being able to have a gigawatt scale sort of fleet deployment on 60 acres. That's a pretty incredible setup for us that allows us to really start looking at a lot of areas and opportunities that I think most other potential solutions aren't able to look at. So the fleet sort of deployments are really what we're starting to look at. And I think just kind of part and parcel of that is if we're looking at just the sequencing of those deployments, what does it look like? And I think I kind of alluded to it with what we're looking to do up in MISO and we'll probably do in some of these other regions, which is the first plant or two are going to be going into the grid. The grid needs that power right away. A lot of the folks on the data center side, especially because this technology is a new type of gas power generation technology, they're going to want to have that redundancy on the power, but they're also going to want to see it active in that area. And so I think just naturally the way you're going to see it play out is the first batch of plants go on to the grid. That also then starts to become the backup power for future deployments. And then those future deployments can be co-located behind that meter. So you have the redundancy of the plant going into the grid, and you have the co-located power behind the meter. And like we mentioned in the prepared remarks, we're always going to have that peaking storage capability of the oxygen oxy plus storage. So we're always able to provide that peaking power back to the grid even when we're servicing that baseload behind the meter co-located. But maybe I'll turn it over to Brian a little bit to give you guys some color on how we're thinking about just the operational side.

Brian Allen, President and Chief Operating Officer

Yes. Thanks, Danny. I think you covered it well. Just a few other points is it's not always – if you're doing multiple plants side-by-side, it's not always necessarily scaling up the equipment. We foresee, of course, it's the same turboexpander, the same compressors, pumps, but there are significant construction savings just for the EPC to do duplicate powertrains. This plays out in the power industry when you do let's say, a combined cycle plant and you're doing multiple turbines that are the same. There's just significant learnings on the site and spreading of let's say, your overhead indirect construction costs across a larger facility. And then, as you said in the question, there are some items that don't duplicate. You're still going to have one control room and one set of water treatment. So there are pure savings by combining multiple plants on the same site. And then in other cases, it's savings on construction doing project-over-project.

Thomas Meric, Analyst

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

Danny Rice, CEO

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

Brian Allen, President and Chief Operating Officer

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

Operator, Operator

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

Betty Jiang, Analyst

Hi. Good morning. I want to ask about the oxygen storage opportunity. You mentioned that one day of extra oxygen storage is equivalent to about 1.2 gigawatt hours. Can you clarify how much spare capacity is currently included in the base power plant design to generate that excess oxygen? Or is this a separate design choice that needs to be made from the start to incorporate that optionality?

Danny Rice, CEO

Thank you for the question, Betty. I'll hand it over to Brian to discuss some of the key points. Before I do, I want to emphasize that the choice of how much on-site storage and excess oxygen production is highly customizable and will depend on the specific application. This includes considerations such as how quickly you want to recharge and the duration of storage you need. Brian, do you have any additional insights to share?

Brian Allen, President and Chief Operating Officer

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

Betty Jiang, Analyst

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

Danny Rice, CEO

Right. Yeah, Betty, I think if you think about it through the lens of just selling a license to build a NET Power plant from our perspective, the customer is really going to look at what's the total intrinsic value of the NET Power plant. I think everything that we've really been doing internally to-date has really been focused on the baseload power output of this facility. And we really haven't been trying to ascribe much value to this peaking supplement, which doesn't eat into the baseload. It's really just supplemental to it. I think now that we kind of see what's happening in the market, where you're starting to see these data centers trying to put their power onto these grid systems, you're starting to see a lot of reluctance and just resistance from a lot of these system operators both on front of the meter, but also on the behind the meter co-located situations. This sort of peaking capability that we can provide to the grid for their benefit, while at the same time servicing the co-located data center really is a solution where I think everybody gets what they want. The data center gets their 24/7 power, 365 days a year for a set amount of power. And at the same time, the grid gets the dispatchable peaking power that it needs to be able to meet its nighttime power load, really as you look at just the cycling of renewables from daytime to nighttime. That's what the grid needs is that sort of dispatchable response power. And so right now I think there's a little bit of a logjam with what's happening on the data center side both within the RTOs but also at FERC where they're really trying to figure out how are we able to meet this load growth with new generation without compromising just the reliability of the grid system. So we're kind of just sitting here today with this inherent solution that's part of that oxy-combustion process where we're kind of saying we can do both. We can provide the baseload co-located power that the data centers need while also at the same time from the same asset meet the peaking capabilities and peaking demand that the grid needs. And so there's real value there, right? If you can provide peaking power to the grid at higher than just 24-hour round-the-clock prices, there's real value there. And back to Brian's point earlier on just how quickly you can recharge and dispatch? If that is like a nightly occurrence or if you're in an area where there's weather events, whether it's cold winters or hot summers, you can have those seasonal opportunities to be able to capture much, much higher prices. So there really is a ton of intrinsic value in this oxygen storage peaking capability. But again, it's going to be customized for each market. But I would say if you look at just like the intrinsic value of this oxygen piece relative to the cost to install oxygen storage tanks, our back of the envelope math suggests this is probably the cheapest form of long duration energy storage, granted this energy storage is really in the form of auxiliary load, right? Because you're able to turn down your ASU to pick up where that energy is coming from. But no matter how we slice it, this becomes probably the lowest cost long duration energy storage in the world. So it's a really, really interesting and something that the market really needs given the struggle to be able to meet both grid demand for reliable power along with being able to meet this 24/7 large load that's coming down the pike from data centers.

Operator, Operator

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

Pavel Molchanov, Analyst

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

Danny Rice, CEO

Yes, it's a great question, Pavel, and I appreciate you being on the call today. When we consider what qualifies under the IRA and what truly represents bipartisan solutions, carbon capture stands out as one of the key areas. It is, in our view, the most effective means of decarbonization. If you look at what NET Power can provide, replacing every coal-fired power plant and carbon-emitting natural gas power plant in the United States with a NET Power plant would eliminate total CO2 emissions from U.S. power generation, which is the largest source of emissions in the country. This makes it a significant tool for decarbonization. From a political perspective, this issue tends to resonate more with one side than the other. However, what’s crucial, especially under the current administration, is that NET Power employs a unique technology that utilizes fossil fuels. The initiatives supported by Trump include enhancing fossil fuel production to reduce energy costs for consumers. NET Power is a natural gas-fired power plant, so we leverage that feedstock effectively. Additionally, within the framework of 45Q, our approach not only uses natural gas but also involves new well development in conjunction with the natural gas and oil sectors. Thus, carbon capture fundamentally relies on the capabilities and successes of the fossil fuel industry. If any aspect of the IRA is likely to remain intact, it is carbon capture for the reasons I mentioned. Furthermore, it would be beneficial to have an administration that backs the 45Q credit for Enhanced Oil Recovery (EOR). Presently, there's a $60 per ton credit under 45Q for CO2 used in EOR, and there might be potential for this to increase to better incentivize oil production. While our primary focus is on Class VI permanent geologic sequestration, we've identified considerable economic and industrial benefits from utilizing CO2 in a low-risk manner for enhanced oil recovery, particularly as we show with Project Permian in West Texas. This initiative underscores the skill set and experience of the fossil fuel industry that has propelled the U.S. to its current status as an economic powerhouse. We hope to see continued support for the 45Q program for something like NET Power, and we believe carbon capture will likely be a major focal point that endures through the legislative process.

Pavel Molchanov, Analyst

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

Danny Rice, CEO

Yes. I would say our primary effort, especially because we're really focused on the origination front, really is focused around North America. The reason is fairly simple. North America is the market where these plants probably have the highest intrinsic value, and it's a function of access to the lowest cost natural gas in the world, access to great CO2 sequestration potential where there is tangible value in the form of the carbon incentives from programs like the 45Q or from a carbon tax like you have up in Alberta, Canada. And so North America is just a place where these plants have not just like the highest intrinsic value, but it's also like just the largest markets for us to be able to scale and go after. So North America is certainly our priority. But as we look at some of these other markets around the world, Australia is starting to pick up steam, in terms of interest over there. Southeast Asia is a little bit interesting. I think the bigger challenge there right now is really figuring out where are they going to get access to really low-cost natural gas, and what are they going to do on the sequestration side. And so as the market just continues to mature, we're really going to be focused on scaling up here in the United States. And then as we've mentioned before, conversations in the Middle East are progressing. The Middle East is interesting just because they really do have some of the lowest cost gas on the planet, and they do have major power ambitions that just continue to scale. The biggest thing over there is there going to be an incentive on the sequestration side that you can get paid for the sequestration rather than just allowing the free market to put a price on or a value on it. So these other markets are interesting. Europe just needs to get its Energy Act together altogether. But as they do that it will certainly lead people to see that solutions like NET Power are going to be the lowest cost 24/7 clean power solution. It's just taking a lot of these countries a little bit more time to be able to get there really to compete with the economics of projects here in the United States and Canada. So we're focused we think in the absolute right markets, the absolute biggest markets. And it's nice that this US-based technology is going to be not just commercialized here in the US, but it's going to be scaled here in the US and Canada really for the benefit of global deployments further down the line.

Pavel Molchanov, Analyst

Thanks very much.

Danny Rice, CEO

Thanks, Pavel.

Operator, Operator

I'm not showing any further questions. Our next question is from Noel Parks with Tuohy Brothers. Please proceed with your question.

Noel Parks, Analyst

Hi. Good morning.

Danny Rice, CEO

Hi, Noel.

Noel Parks, Analyst

I have a couple of questions. First, I was wondering about the various types of partnerships you currently have and their potential to expand into other regions. Is there any value in forming direct partnerships with gas infrastructure or pipeline companies? I assume there are some locations with easy access to the gas supply, while others may require upgrades or expansions. I'm curious if this aspect is part of your current strategy.

Danny Rice, CEO

Yes, it definitely does. When we consider the various strategic stakeholders that should collaborate for these NET Power hubs, the gas supply component is certainly significant. An interesting trend in the industry is that companies involved in gas transportation, whether through long-haul interstate pipelines or regional gathering systems, are beginning to recognize their potential in CO2 transportation and sequestration. Many of these midstream companies are exploring how they can pair their existing pipelines with CO2 lines, utilizing their expertise in constructing and operating gas transportation facilities, which is quite similar. Therefore, in our discussions with gas supply stakeholders, we are also engaging in conversations regarding the transportation and sequestration of CO2. This dual expertise allows them to create additional value in partnership with us within these hubs. Does that make sense?

Noel Parks, Analyst

Is there a possibility for any of those to fund projects, for example, for twining the lines, or is it more of a separate vendor arrangement they would consider?

Brian Allen, President and Chief Operating Officer

No, I think they will be more strategic with constructing new assets and increasing the capacity of certain assets.

Danny Rice, CEO

One of the advantages of NET Power is that our plants can stimulate new demand for natural gas in specific regions, which can justify expanding the gas pipeline size. Simultaneously, this can validate the construction of a CO2 line due to the significant volumes we anticipate from our plants. We're capturing nearly 900,000 tons of CO2 for each plant, and if we consider a configuration of 4 to 10 NET Power plants, that translates to 3.5 million to 9 million tons of CO2 annually. With that amount, building a 200 to 500 mile pipeline is justifiable, as it is substantial. Ideally, we plan to place these plants close to the CO2 sinks, minimizing the need for extensive infrastructure. However, as we look to deploy NET Power plants in the Southeastern U.S., where suitable CO2 storage is limited, building a CO2 pipeline will be necessary to transport the CO2 back to the Gulf Coast or the Midwest. This will require volume sufficient to support those investments. Thus, NET Power can help drive the development of new infrastructure to decarbonize areas that are not located near these geologic sinks. This creates a strategic and collaborative dynamic between us and natural gas infrastructure providers, who are keen on boosting natural gas demand. We can offer not only that demand but also an additional revenue stream through CO2 transport and sequestration following the operation of the plant. This relationship is truly strategic and mutually beneficial between us and the gas infrastructure players.

Noel Parks, Analyst

Thanks. It's great to hear. That’s all I had.

Operator, Operator

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

Danny Rice, CEO

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

Operator, Operator

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