NET Power Inc.

Greetings. Welcome to the NetPower second quarter 2024 earnings call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero and your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Bryce Mendez, director of investor relations. Please go ahead.

Good morning, everyone, and welcome to NetPower'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, NetPower's Chief Executive Officer.

Danny Rice Thanks, Bryce, and thanks, everybody, for joining us today. 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 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 NetPower will commence the first phase of a rigorous turbo expander equipment validation program at our report demonstration facility. Second, we're building out our project backlog through our origination efforts across competitive power markets in the US and Canada. These originated projects were originally intended to accelerate early plant deployments after serial number one 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. And 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 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're seeing around the clock load growth, primarily from continued electrification of everything in new demand from things like data centers. We believe clean, 24-7 firm power solutions like ours will make or 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, in the decade or so the team has poured 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 28 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, firm solution. For the first time ever, load growth to 24-7 power means that levelized cost of energy, or LCOE, must be assessed on a 24-7, 365 basis. And 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 the most favorable economics. Excellence, park 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 build, will still be highly competitive with any other clean, firm power alternatives. 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 1,000 net power plants. This $60 includes the 45Q benefit, which amounts to approximately $20 per megawatt hour. So on an unsubsidized basis, we're targeting $80 per megawatt hour or less. Average U.S. power prices are approaching $60 per megawatt hour with unprecedented load growth coming down the pike. 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 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's 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 new combined cycle gas plants, for example, we're hearing through the market costs in the $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 US grid today is at around 370 grams per kilowatt hour. Net power is 40 to 75 grams per kilowatt hour. We comply with the EPA's proposed section 111 B and D rules and installing that power from here on out in the US would be a 75% reduction in US power emissions while improving grid reliability and ensuring power price is not much higher than where they are today. Just given the underinvestment in firm resources over the last five to 10 years, there's a lot of capital and attention on batteries, which is more 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. And 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 plants can generate highly economic return to the 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 seven 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. 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're focusing most of our origination efforts today. And 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're 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 six CO2 sequestration permit. And 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'm excited to announce that NetPower officially opened its Houston office in July. We look forward to continuing to the NetPower team down in Houston, which has long served as an epicenter for energy industry talent. I'll now hand it over to Brian to give an operational update.