NET Power Inc.

Greetings and welcome to the NetPower, Inc. fourth quarter 2024 earnings call. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Bryce Mendez, Director of Investor Relations. Bryce, please go ahead.

Good morning and welcome to NetPower's fourth 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 fourth quarter of 2024 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, NetPower's Chief Executive Officer.

Thank you, Bryce, and good morning, everyone. I'd like to start by saying 2024 was a year of significant progress for NetPower, even amidst the challenging conditions we faced while commercializing our technology. We completed the front-end engineering and design, or FEED, for Project Permian, which we refer to as SN1. marking a major milestone for the world's first utility scale fully integrated clean gas power plant of its kind. We also kicked off the first phase of our equipment validation program with Baker Hughes at our report demonstration facility, achieving successful ignition on demand and accumulating over 140 fired hours to date. As many of you know, the energy sector has been grappling with unprecedented demand for reliable generation capacity, driven by more than a decade of underinvestment in power infrastructure and baseload generation, which is now compounded by rapid load growth, especially from AI and data centers. This unprecedented demand response for new baseload generation, which NetPower is developing, has led to significant inflationary pressures across the sector. Completing the feed gave us a detailed indicative estimate, including a buildup of material quantities and labor costs. but it also revealed areas where we can meaningfully reduce costs at our first deployment. I'd characterize this as fairly standard in bringing a new technology to market. As a result, we've shifted our focus to a post-feed optimization and value engineering exercise to strip costs from SM1 and our standard plant design with minimal impact to performance, bringing us closer to delivering the lowest cost form of clean, firm power that's scalable. Before I dive deeper into our strategic pivot and outlook, I'd like to frame the broader macro context we're operating in. The surge in lead growth, particularly from AI, just further underscores the value of reliable energy. We believe net power can be the most logical solution to deliver clean, reliable, and affordable energy. Over the last 48 years, the macro pendulum was swinging far in the direction of prioritizing and incentivizing clean generation capacity with little consideration towards overall power prices or grid reliability. But now, the incoming load growth has quickly swung that pendulum in the opposite direction, driving a singular focus on adding reliable, affordable power as quickly as possible. We're caught in the middle of this frenzy. Our plant's expected costs are impacted by the same tightness everyone in the power sector is seeing, especially those developing new baseload thermal generation solutions, which makes it a little bit tougher for us to negotiate when we're competing with companies ordering much more than we are. but we remain focused on proving our technology and positioning to be the lowest cost source of clean farm power in the coming decade. With over $530 million in liquidity at year end, we're in a strong position to advance our technology, optimize our plant designs, and attract the right strategic partners to unlock this technology's potential. I'll now walk through our key milestones from 2024 and our priorities for 2025 before handing it over to Brian for operational updates and Akash for the financials. Starting with Project Permian, completing the feed was a major undertaking between us and our feed partner, the Zachry Group. As far as we know, this was the largest ever feed completed in the last few years for a clean gas power plant. In some ways, the feed was a significant de-risking event for the company, as it identified no fatal flaws in the technology or plant design And as a plant, we can go build today, absent the cost, economic, and fundraising constraints I'll now touch on. On the cost side, the indicative estimate highlighted the market challenges we face as our technology isn't immune to the inflationary pressures impacting the entire sector, as I just mentioned. For reference, when we went public in 2023, our preliminary CapEx estimate for SN1 was $950 million. In the years that followed, we've revised that forecast upwards to $1.1 billion and then higher to better reflect the rising costs around us. And now, based on the completed feed and where we think we'll land with the value engineering work we started this quarter, we're estimating total installed costs will be $1.7 to $2 billion. This represents an approximately 100% increase in our total installed cost estimate, with the inflationary pressure being a large factor along with the site and project-specific items I'll touch on later. This increase is in line with the cost increases being seen by unabated gas projects. For reference, combined cycle gas turbines, or CCGTs, had estimated costs of around $1,100 per kilowatt just a few years ago. That figure rose to $1,500 per kilowatt last year, and now we're seeing new combined cycle projects price north of $2,200 per kilowatt. If and when the global supply chain catches up to this demand, we'd expect to see meaningful cost deflation above and beyond the cost savings we hope to achieve through value engineering and our multi-plant initiatives. Part and parcel with the cost inflation is just the tightness in the global energy supply chain. Anybody looking to order a CCGT is likely looking at 2030 for base case deliveries. And I think we've done a commendable job lining up the supply chain to deliver our plants on a timeline that's competitive with other gas solutions. With Project Permian Feed, we also learned that a significant amount of costs are unique to West Texas and the first of a kind nature of SN1. Brian will go into more detail on our value engineering, but I'll just add that the Permian has great features that make it an ideal place to put a first of a kind facility. including access to low-cost natural gas and well-established CO2 sinks. But unfortunately, the inherent higher cost to build in West Texas challenges the plant's economics and ultimately hinders our ability to get the project financed today. With this backdrop, our focus is now on plant cost reductions. For 2025, we're focused on three things. First, we'll continue the value engineering exercise to further reduce costs for Project Permian. We'll complete the feasibility studies we kicked off earlier this year for multi-unit projects along the Gulf Coast, which we believe will demonstrate further cost reductions. And third, with a lower cost project premium and a line of sight to material cost reductions from Gulf Coast megaprojects, we'll seek to raise capital and form projects to commercialize the technology. Now, the ultimate goal here is to be the lowest cost form of clean, firm power at a reasonable premium to carbon-emitting alternatives. So quickly touching on our competitive positioning versus the alternative forms of clean, firm power that can be deployed. First, there's post-combustion carbon capture, or PCC. PCC increases the development operational complexity of a combined cycle, and the costs are not well established because it hasn't yet been successfully deployed at scale, particularly for CCGTs, where there is a low concentration of CO2 in the flue gas stream. And with commercial demand here today to build new unabated combined cycles, developers aren't required to install PCC in order to secure long-term PPAs to help underwrite project funding. Interestingly, PCC reduces the amount of net electric output from combined cycles. So, in a load growth scenario like we're in now, installing PCC is counterproductive to the grid's primary needs. Nuclear is the other scalable clean-firm power generation option. And while it looks promising on paper, we don't believe it's a credible deployment option for the next 10 years. Bottoms-up estimates suggest new nuclear projects carry an LCOE of over $200 per megawatt hour today, and first deployments are 10 years away. We consider ourselves energy altruists, and we want to see all forms of clean, reliable, affordable power succeed. But we're also energy realists, too, and it's hard to see nuclear as a viable option for at least the next decade. Now, that doesn't mean the U.S. and others shouldn't invest in advancing nuclear technology, but we think there's a big difference between deploying now, which is impossible, and advancing the technology through 2035 and deploying it a decade from then. Nuclear has time to mature, thankfully, due to the availability today of firm technologies like combined cycles and clean, firm solutions available much sooner, like ours. So as we think about our timing, operationally, we'll be ready to go this decade if we can get costs down and create a viable pathway to economic commercialization. This pause is frustrating but necessary, and yet we think we're still years ahead of competing technologies. So in a way, we have the benefit of time to ensure we get it right before embarking on a pathway that will require billions of dollars from strategic commercial partners for project-level funding to reach our desired end state as the lowest cost form of clean farm power. In addition to the value engineering and multi-unit pre-feed exercise, our related area of focus this year is securing sites along the Gulf Coast for modular multi-unit deployments of up to one gigawatt each. These sites can also co-locate with large load data centers or industrial users. However, which of these projects should become slotted for SN2 or 3 will ultimately depend on securing strategic capital partners. Beyond SN1, We've begun evaluating other creative ways to commercialize this technology and unlock its embedded value. For example, Baker Hughes and Woodside have kicked off the industrial scale program to target industrial applications looking for clean, reliable power. This smaller scale power plant would be a true licensing opportunity for net power with limited capital required from us. So with that, I'll hand it over to Brian for operational updates.