NET Power Inc. (NPWR) Q1 2026 Earnings Report, Transcript and Summary

Greetings, and welcome to the NET Power Inc. First Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Bryce Mendes, Director of Investor Relations. You may begin.

Thank you. Good morning, everyone, and welcome to NET Power's first quarter 2026 earnings conference call. With me on the call today, we have our Chief Executive Officer, Danny Rice; our President and Chief Operating Officer, Marc Horstman; and our Chief Financial Officer, Lee Shuman. Yesterday, we issued our earnings release for the first quarter ended March 31, 2026, along with an updated investor presentation. Both are available on our Investor Relations website at ir.netpower.com. During today's call, our remarks will 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, which are discussed in our SEC filings. We assume no obligation to update any forward-looking statements. With that, I'll turn the call over to Danny Rice, NET Power's Chief Executive Officer.

Thank you, Bryce, and good morning, everyone. I'm here today with Marc Horstman, our President and Chief Operating Officer; and Lee Shuman, who recently joined us as our new Chief Financial Officer. Lee brings a strong track record in energy project finance, and we're glad to have him on board for this pivotal period in our company's history. Let me tee things up for Marc and Lee with some comments on the macro, and then we'll open the line for questions. Demand for power continues to grow, and I think everyone at this point understands the primary source of new power generation for the foreseeable future will come from natural gas-powered equipment. The availability, the reliability and scalability is unmatched. The thing that's different with AI versus other forms of load is the cost of power is very inconsequential to AI economics. That's mostly because the cost of power is only 10% of the total cost of AI. The lion's share of the cost are the GPUs, the networking costs and data center shell. AI has become a race and will be decided by speed and scale, governed by availability of power, not the cost of power. Power projects, they've evolved quickly from waiting on the grid to now pursuing behind-the-meter power now. Generation mixes have evolved from large frame turbines to hundreds of reciprocating engines strung together to get the same gross power output. Heat rate, overnight cost and geography, they've all become far less important. In this market, speed, scale and community acceptance matter most of all. Fortunately, the U.S. energy industry, particularly the one that revolves around natural gas, is ready to meet this demand. We are part of that ecosystem with a very specific mission to transform natural gas into the lowest cost form of clean firm power. Clean power is moving down the list in terms of importance, but that's not to say if clean, reliable power was available on the same time line and scale as the innovated options, there's a good chance it should be selected. So that's where we find ourselves today. We've put ourselves in an excellent position to deliver a clean firm solution that can deliver first power this decade at a compelling price point with a pathway to under $100 a megawatt hour. This can be achieved in West Texas, where there's abundant low-cost gas to power generation and sufficient storage capacity for captured CO2 by pairing it with enhanced oil recovery. This proven application can underwrite the development of over 10 gigawatts of clean firm power generation for less than $100 a megawatt hour. Trying to do this elsewhere would be 20% to 30% higher cost of power, but the greatest cost would be longer time lines, greater risks and less scale. What it will come down to, for us, is if we can deliver at speed and scale to attract demand today and is the market willing to accept EOR as a viable pathway for carbon capture. The importance of energy availability is no more pronounced than it is today. As I just mentioned, we need as much natural gas for power generation as we can. Fortunately, we're in a great spot there. But separately, the global energy shock caused by the Iran war has cast a spotlight on the importance of energy security for natural gas and oil. The U.S. as the largest producer of both commodities, is mostly insulated from the supply shock so far. However, the situation has become an important lesson to people that the oil ecosystem isn't contained to just gasoline for cars. It's jet fuel, it's plastics, it's fertilizer, all irreplaceable at the scale and cost the world needs. So if modern civilization and quality of life is indispensable, then so too is oil, which sort of leads me back to the mousetrap that we're designing. We're designing a circular energy ecosystem that leverages the 2 most important energy sources we have on this planet, utilizing low-cost, reliable natural gas to produce reliable, low-cost power at massive scale and using technology to capture nearly all of its produced CO2 and then using this CO2 to help produce oil that wouldn't otherwise be recoverable. What stays behind in the reservoir forever is our captured CO2. We think that's the right solution for what the U.S. needs for the foreseeable future, more natural gas power generation, more domestic oil production, lower emissions overall. On the life cycle emissions point, our third-party validated life cycle emissions analysis calculation, or LCA, is estimated at roughly 210 grams of CO2 equivalent per kilowatt hour, which compares extremely favorably versus an unabated combined cycle of around 440 grams of CO2 equivalent per kilowatt hour and coal at north of 900 grams per kilowatt hour. So if improving the environment is important to you, this product checks that box. We'll continue our public pushing campaign to move the buyer ecosystem toward our vision of clean firm power. The good news is we expect to have answers to this in the coming months. As Marc will talk about in a second, we've done everything we can from an engineering and technology standpoint to design a derisked clean firm power solution. Before we move forward with committing any substantial amounts of capital to securing additional equipment, we need to ensure the customer demand is not just there, but is committed to our projects. So we're going through this process right now with our strategic adviser to help determine which prospective customers are aligned with our time line and our vision. I can tell you, not everyone wants to be associated with oil production, and that's okay. But if no one wants to be associated with EOR, even in spite of the environmental and social benefits that come from this ecosystem we're creating, it's better that we learn that before we commit any additional capital to it. The projects we're advancing help make the world a better, cleaner and safer place. But market acceptance, we think, will come down to 3 things. First, are we doing it fast enough? Speed really matters in this market. Second, are we doing it big enough? Scale also really matters in this market. And third, is it clean enough? And more importantly, are customers aligned with our energy ecosystem of using natural gas to create [ pain from ] power and using the CO2 to produce more oil to help support the quality of life of modern society. To us, it's a no-brainer. But again, we're not the customer. We're only the creator of these solutions. So in the background, we're advancing detailed engineering and project financing, understanding they come together as a finish line with the commercial offtake. We're progressing all 3 simultaneously. So with that, I'll turn it over to Marc to update you on the great progress we've made bringing the solution to the doorstep of FID and commercialization. Marc?

Thank you, Danny. Good morning, everyone. I want to walk through 3 areas this morning: the commercial offtake structure, project execution for Permian Phase 1 and an update on our progress with our key technology partner, Entropy. Let me start with offtake. Turning to Slide 5. We have engaged a strategic adviser to lead the formal offtake process for Project Permian Phase 1. The offtake agreement is the gating condition for project financing, and it is the primary commercial proof point that a durable market exists for our clean power product. This slide shows commercial structure we have designed around NET Power's deployment offering. The flexibility here is deliberate. The first deployment is 80 megawatts, grid connected via Oncor and ERCOT, pursuing a fixed price long-term PPA as the offtake structure and CO2 sequestration through Oxy's EOR infrastructure. The second and third deployments introduce optionality, either continued grid delivery or behind-the-meter colocation at a larger scale. All 3 phases use Oxy EOR infrastructure for sequestration. Slide 6 shows the full picture of what we're building and the time line to get there. Project Permian Phase 1 is the commercial deployment of the clean power product, 80 megawatts net output, greater than 90% CO2 capture sited on leased acreage from Oxy near Midland, Texas. We continue to target FID in the second half of 2026 with commercial operation in early 2029. Project pairs a natural gas combined cycle configuration with Entropy's post-combustion carbon capture technology. Power delivery is grid connected at 80 megawatts. CO2 is 100% offtake to Oxy under indicative terms, which we are advancing towards definitive agreement. As mentioned, the site has the potential to scale to 800 megawatts, 10 units on the same acreage, which is a meaningful part of the commercial story we are telling to offtakers who want volume certainty over time. On the gas supply front, we're targeting an MOU with a major supplier in Q2 with definitive agreements negotiations to follow. On procurement and long lead equipment, we're executing a methodical release program running in parallel with our offtake and financing work streams. The Siemens RPS gas turbine packages, approximately $77 million is contracted and represents the first executed equipment commitment. The switchyard and gen tie line and generated [indiscernible] are targeted for the June timeframe. HRSGs, steam turbine generator and air cooled condenser are targeted for July. And most likely PCC equipment, absorber towers and amine regen systems follows in the August through September window. Finally, I want to highlight our product breakdown structure work underlying all of this. We have defined 8 to 10 equipment packages plus 10 to 20 discrete skids. This is the foundation of our repeatable clean power product design once, order and build many. Every decision we make on this project reduces non-recurring engineering costs for future deployments. Turning to Slide 7. A few updates on our Entropy relationship and the technology foundation beneath it. The joint development agreement with Entropy is the most critical near-term corporate deliverable. The JDA governs the commercial terms under which NET Power will license and commercialize Entropy's amine-based PCC solvent technology for U.S. power generation through 2032 on an exclusive basis. Entropy can commit up to 49% equity contributions for future deployment, beginning with Project Permian Phase 1. We are aligned on the commercial structure and intend to finalize this agreement in Q2. Entropy has a proven track record. Glacier Phase 1 has been running for more than 3 years, demonstrating capture from gas compressors at a commercial scale. Glacier Phase 2 is expected to come online in Q2 2026. This is at the same site but expands with more compressors and integrates a gas turbine with CCS at commercial scale, capturing 160,000 tons per annum. When that comes online, it further validates the core technology integration that Project Permian is being built on. This is a significant derisking event for our project and for the offtake conversation. Project Permian is the next direct scale-up of the PCC tech. Two 35-megawatt turbines, 380,000 tons per year of CO2 capture, TRL 8 to 9. This is not a novel configuration. It is a disciplined scaling of a demonstrated design and technology. With that, I'll turn it over to Lee for the financial update.

Thank you, Marc, and good morning, everyone. I'll keep this brief. I'm pleased to be on my first quarterly call as NET Power's CFO. I look forward to getting to know many of you over the coming quarters. I spent the better part of 25 years developing, financing and restructuring power infrastructure, thermal, renewable distributed across a range of structures and market cycles. In total, I've been involved in power transactions valued north of $10 billion. Most recently, I led power financing at Javelin Global Commodities. Before that, I was CFO at WattBridge Energy, where we raised just over $2 billion to develop a 2.4 gigawatt portfolio of natural gas peaking plant in Texas. Prior to that, I held roles at [indiscernible] Mirant, which later became GenOn and was subsequently acquired by NRG, developing, financing, optimizing, restructuring and selling power assets domestically and internationally. I've also worked with start-up renewable developers to successfully develop projects and execute bankable deals in a very different framework from larger, more established organizations. This is an important context because NET Power's situation is one I recognize, an asset with potential for contractable cash flows, proven underlying technology and a capital structure that needs to be built from the ground up. That's the work I know how to do, and it's why I'm excited to step into this role. Additionally, based on my experience with NET Power over the last month, it is clear to me that the team has the expertise and the drive to do the hard work to deliver on Project Permian and beyond. Turning to our financials. We ended the first quarter with approximately $319 million in cash and cash equivalents and no debt. We incurred a few onetime costs associated with pausing the Oxy combustion program, and we expect go-forward spend to be more for the PCC program. Our G&A burn is fairly low, roughly $8 million to $9 million per quarter, giving us fairly long runway to reach FID. We expect the spend to ramp up in the coming months as we release critical long leads to maintain our project schedule. As Danny mentioned in his remarks, we remain prudent in committing capital to this first project, positive indications for the first project and future projects will give us confidence to risk release long lead items and potentially secure additional equipment. On project economics, the TIC target remains in the $475 million to $575 million range. On the financing side, we're targeting an equity investment from NET Power in the $125 million to $175 million range, with the balance of capital coming in the form of debt and equity participation from Entropy. We have the capital on the balance sheet to fund that today and sufficient dry powder to begin working on the next phases of the first project or the next project elsewhere in West Texas. As Danny mentioned, the commercial offtake process is the most consequential near-term event, a target of $100 per megawatt hour or better supports project bankability and an appropriate return profile. This price point is markedly below other clean firm options, which is in part due to EOR application and access to low-cost natural gas. I look forward to providing more updates in quarters to come. Let's open the line for questions.

[Operator Instructions] Your first question comes from the line of Ryan Levine from Citi.

You mentioned $8 million to $9 million of burn before some of these long lead time items need to be procured. What milestones would be needed to procure those long lead time items? Any color around how that burn rate would evolve as you progress through different development milestones?

I'll turn it over to Marc to answer.

Can you guys hear me?

Yes, we can hear you.

All right. Excellent. Sorry about that. I had mute issues as well, Ryan. Ryan, Marc Horstman. Predominantly around the long lead equipment, it's really referring back to what Danny mentioned in his opening comments. Through the offtake process that we have ongoing right now, we need to see significant, call it, activity and alignment with potential offtakers that would support call it the next step in releasing those long lead or pre-FID purchase orders. And from that standpoint on, our team is actively working with our potential EPC and GCs on further detailing our construction schedule. As you can imagine, the lead times that we're seeing on certain equipment is moving around based around -- or based on the activity in the marketplace. So it's really a month-to-month look at what equipment we need to release as we continue to keep pulse with those vendors in order to maintain that first half 2029 COD schedule. But the first and foremost, call it, evidence information that we're looking for is really that, again, is there a market there for the clean power? Is there a path forward for our product on the expansion from the 80 megawatts to something larger at the project site.

And then assuming you're able to achieve commercial interest to advance the lease that component of the development cycle, when you -- in terms of regulatory approvals, would this have to go through their batch study process? Or how are you looking around the regulatory elements to achieve commerciality.

From the standpoint of deploying the first 80 megawatts, we're going through our air permitting process now, which looks like based on our recent discussions and meetings with the Texas permitting office, looks like that we would have an air permit towards the second half of this year. So that proceeds quite well. The remaining permits that we would need in order to bring the project through commercial operation are planned, and we see very little risk on those moving forward. So from that perspective, everything seems to be moving along. Obviously, we stay close to it as we evolve because this is the first time this technology is going through the permitting process. But thus far, between interaction between Entropy ourselves and the Texas Environmental Commission, everything seems to be quite aligned and call it, permitting levels are within the acceptable limits.

And then last question for me. In terms of the equity check from NET Power to fund the project, there cited a range. Have those commercial terms been negotiated? Or what are the factors that would lead to where you fall in that range?

Hi Ryan, this is Danny. I think the range is really a function of what the rest of the capital stack looks like. As Marc sort of mentioned in his remarks, the JV with Entropy they'll have participation rights alongside us for 49% of the equity. There's certainly flexibility on both sides as to what each respective party's activity check is going to look like. Really, the balance of the plan is going to be financed with debt in some form or fashion. And I think that's one of the things that Lee and I will really be figuring out over the next couple of months sort of in parallel with the offtake process is the financing going to be in the form of equipment financing? Or is it going to be more in standard sort of project financing that's sort of underpinned by the contracted cash flows of the project? So the commercial process that we're going through is really going to be very instructive in terms of what forms of credit is going to be available to this facility. And so I think a combination of the form of credit and the entry participation is sort of what gets us back to that $125 million to $175 million range. And even at the high end of that range, the $175 million, we're sitting with a little over $300 million of cash and cash equivalents on the balance sheet today. So we'll have pretty sufficient dry powder to get working on either the next phase of this specific projects or assuming, obviously, the commercial demand is there, an additional project elsewhere within the Permian Basin.

There are no additional questions at this time. I would like to turn the floor back over to Danny Rice, CEO, for closing comments.

Yes. Thanks, everyone, for the time this morning, and Ryan, thanks for the questions. Yes, I mean, we're at an interesting moment for NET Power. The macro environment has continued to move in our direction. Power demand is accelerating. The case for a clean firm power, it is still there. There's just no other solutions being deployed. And our solution in West Texas is as well positioned as it's ever been. We've done the hard work on the technology and the engineering side. And what's in front of us now is the commercial process, which I think is the right place for us to be. So we feel good about where we are. The offtake process is active. The Entropy JDA is closed. The equipment program is moving and Lee is already adding real value on assisting me on the financial architecture. So none of these work streams are waiting on each other. They're sort of advancing in parallel and they'll come together at FID. But as I sort of mentioned in the comments, we'll be measured in how we commit capital, but we're genuinely optimistic about what the next few months will show us. And we expect to have meaningful updates to share with you all, and we look forward to having those conversations. So thanks again for your interest in NET Power, and have a great day.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.