Yahoo Finance NET Power Inc. (NYSE:NPWR) Q3 2023 Earnings Call Transcript
NET Power Inc. (NYSE:NPWR) Q3 2023 Earnings Call Transcript November 17, 2023
Operator: Greetings and welcome to the NET Power Third Quarter 2023 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Bryce Mendes, Director of Investor Relations. Thank you, Bryce, you may begin.
Bryce Mendes: Good morning, everyone, and welcome to NET Power's third quarter 2023 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. This morning, we issued our earnings release for the third quarter of 2023, 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 statement. With that, I will now pass it over to Danny Rice, NET Power's Chief Executive Officer.
Danny Rice: Thanks, Bryce. Hi, everyone, and welcome to NET Power's third quarter 2023 earnings call. I'd like to briefly revisit our strategic initiatives before I turn the call over to Brian for some key operational updates. Our three-pillared strategy, which we outlined on our inaugural earnings call, serves as a framework to measure our progress towards achieving clean, affordable, and reliable energy. As Brian will speak to shortly, we're working towards not only demonstrating our patented technology at the utility scale, but also towards creating a standardized plant design that will allow us to get to manufacturing mode as efficiently as possible by the end of this decade. Simultaneously, we continue to make great progress towards building out our project pipeline, which I will touch on further in a few minute.
This technology opens an incredible universe of opportunities for us, and our first plant will ultimately set the stage for future deployment, and it's of the utmost important to get our first one right. We're taking a methodical approach to ensure that this first utility-scale project validates the technology while operating with a focus on clean, reliable, and safe operations. NET Power is on a mission to lower the cost of power and lower the emissions from power without sacrificing reliability. The world is beginning to see that for energy to be sustainable, it needs to be clean, more affordable, and more reliable. Natural gas has been proven to be the go-to energy source to meet our reliability and affordability needs, and we need technologies like NET Power to eliminate CO2 emissions in the most cost-effective manner possible.
So with that, I'll pass it over to Brian for some operational updates.
Brian Allen: Thanks, Danny. The NET Power team is diligently progressing the development of our technology, which includes several facets. First, we are advancing and optimizing our process design to ensure that we can deliver the energy trifecta. Second, we're preparing and retrofitting our La Porte demonstration facility for upcoming testing campaigns with our partner, Baker Hughes. And third, we are developing our standard utility scale plant design through our front end engineering and design or FEED work with Zachary as we progress project Permian, our first utility-scale plants. As mentioned on our previous earnings call, each of these areas of technology development are linked and are in development in parallel with the ultimate goal of delivering the energy trifecta at the utility scale.
Slide 5 provides some Q3 updates from our La Porte test facility. We have several site developments underway in preparation for upcoming combustor and turbo expander demonstration tests with Baker Hughes. The initial phase of these testing campaigns begins in 2024. These test campaigns will help derisk our first utility-scale project and create further refinement of our plant controls architecture with Baker Hughes equipment. The development at La Porte includes recycle CO2 compressor relocation, piping and instrumentation enhancements to improve data acquisition, and distributed control system updates to optimize our plant controls. Turning to slide 6, we progressed several important workstream surrounding Project Permian during the third quarter of 2023.
We continue to advance through the FEED process with Zachary, our first prequalified engineering, procurement, and construction partner. We completed our initial surveying and environmental assessment of our plant site, continued releasing bid packages for long-lead equipment, and commenced negotiations of supply and offtake agreements. During the second quarter of this year, we submitted our grant application for up to $270 million to the US Department of Energy's Office of Clean Energy Demonstrations. This process is ongoing with the DOE decision expected in Q4 of 2023. As Danny alluded to, it is critical that we get Project Permian right. Our anticipated project timeline is illustrated on the bottom right-hand side of slide 6. The global energy supply chain continues to be challenged, which means we are facing extensive lead times across critical components.
Our supply chain strategies intended to alleviate these market constraints in the long term, but we must prudently incorporate the current supply chain realities into our project timing and planning for Permian. As such, we are incorporating a 12-month cushion into our expected schedule for Project Permian. We're expecting to achieve initial electric power generation sometime between the second half of 2027 and first half of 2028. We believe this updated schedule will allow us to accomplish safe, clean, and reliable operations and enable this project to serve as the catalyst for all future NET Power plant deployments. I'll now pass it back to Danny for a few commercial updates.
Danny Rice : Thanks, Bryan. Turning to slide 7, we're actively building out our project backlog with the goal of creating clear pathways to state level decarbonization by the time our first plant comes online. This process requires careful planning and strong alignment across our stakeholder ecosystem, which is illustrated on the right-hand side of this slide. Through our origination efforts, we continued to identify highly economic prospective plant locations where the subsurface is conducive to CO2 sequestration and the electricity transmission network exists above ground in regions with attractive spark spreads. We then formed the right partnerships to secure access to these locations, all while in sharing benefits to each and every partner and stakeholder.
The ultimate goal is to maximize the energy and social benefits while minimizing NET Power's environmental impact. Using this all-encompassing approach, we've identified our first originated project, which we're simply calling OP1 for now. This project has completed its technical feasibility study, and we're preparing to commence permitting and FEED in 2024. Over the coming quarters, we're going to build stakeholder support with intent of sharing details of the project once all key stakeholders are aligned. I want to reiterate that we're not looking at one-off projects on a bespoke basis, but rather creating a roadmap to future deployments within the same region with the goal of achieving net zero grid at the state and regional level. I'll now pass it over to Akash to walk through our Q3 financial results.
Akash Patel : Thanks, Danny. Looking at slide 8, NET Power ended the third quarter of 2023 with a strong balance sheet, including approximately $645 million of cash and short-term investments. For the quarter, our total capital expenditures, excluding short-term investment securities, was approximately $3.4 million, comprised of approximately $0.9 million spent on La Porte upgrades and roughly $2.5 million of capitalized costs associated with the ongoing Project Permian development activities. Under the current interest rate environment, we are able to benefit from putting our balance sheet cash to work to materially offset our corporate spend. In the third quarter, our cash flow from operations was approximately zero due to the cash interest received during the quarter of approximately $8 million offsetting our operational cash burn.
Though, we do not expect this trend to continue as we build out the organization and ramp up activity at La Porte, we believe we have sufficient capital through Project Permian commissioning. Our overcapitalized balance sheet provides us with a unique competitive advantage and is a key differentiator for NET Power relative to other energy transition names. The final slide of this presentation provides the detailed breakdown of the company's fully diluted share count of approximately 247 million shares as of September 30. This is comprised of approximately 211 million Class A and Class B vested shares currently outstanding, 19.5 million shares issuable upon the exercise of outstanding public and private warrants, 1.7 million shares subject to earnouts or vesting requirements, and over 14 million authorized shares issuable pursuant to the joint development agreement with Baker Hughes.
That concludes our prepared remarks for this call. We'll now turn it back to the operator to open it up for Q&A.
Operator: [Operator Instructions] Our first question comes from the line of Martin Malloy with Johnson Rice.
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