Net Power Inc. (NPWR) is a clean energy technology company that has developed a groundbreaking power generation system, the Net Power Cycle, designed to produce reliable and affordable electricity from natural gas while capturing virtually all atmospheric emissions. With a focus on innovation and sustainability, Net Power is revolutionizing the energy industry and positioning itself as a critical player in the global shift towards a cleaner energy future.
Business Overview and History Net Power was founded in 2010 with the goal of creating a novel power generation system that could address the shortcomings of traditional fossil fuel-based technologies. The company methodically progressed the technology from a theoretical concept to reality, culminating in the construction and commissioning of its demonstration facility in La Porte, Texas, in 2018. The Net Power Cycle is designed to inherently capture CO2 while producing virtually no air pollutants such as SO2, NOx, and other particulates. It can operate as a traditional baseload power plant, providing reliable electricity to the grid at capacity factors targeted to be above 90%.
In 2019, Occidental Petroleum (OXY) invested in NET Power, providing expertise in the CO2 value chain and construction of large facilities, like the Demonstration Plant. OXY is also the lessor for the site for Project Permian near Midland, Texas. NET Power successfully achieved grid synchronization with their test facility. However, the Net Power Cycle has yet to be integrated with a combustion system and turbine operating coincidentally at target temperature and pressure.
On June 8, 2023, NET Power completed a business combination with Rice Acquisition Corp. II, resulting in an umbrella partnership, C corporation or Up-C structure. This transaction provided NET Power with $662 million in cash, net of certain expenses paid on the Closing Date. The business combination was accounted for using the acquisition method of accounting, which resulted in the company recording $360 million of goodwill and $1.2 billion of other intangible assets associated with developed technology.
The Net Power Cycle is the company's proprietary technology, which combines two key innovations: oxy-combustion, a clean heat generation process that produces water and pure CO2 as byproducts, and a supercritical CO2 (sCO2) power cycle that uses the captured CO2 as the primary working fluid to generate electricity. This unique approach allows for the inherent capture of CO2 while producing virtually no air pollutants such as SOX, NOX, and particulates.
Over the years, Net Power has made significant strides in advancing its technology. In 2022, the company entered into a joint development agreement with Baker Hughes, a leading energy technology company, to collaborate on the design and development of critical equipment, such as turboexpanders, for the Net Power Cycle. This partnership has been instrumental in driving the technology forward and ensuring its commercial viability.
Financial Overview Net Power's financial performance has been characterized by substantial investments in research and development, as the company has dedicated significant resources to refining and validating its technology. As of the company's most recent 10-K filing in 2024, Net Power reported annual revenue of $326 million, annual net income of $33 million, annual operating cash flow of $33 million, and annual free cash flow of $100 million.
The company's balance sheet reflects its focus on long-term growth, with a cash and investment position of $530 million as of December 31, 2024. This strong liquidity provides Net Power with the financial flexibility to continue investing in its technology development and commercialization efforts.
Quarterly Performance In the company's most recent quarter, Net Power reported quarterly revenue of $0, quarterly net income of -$11.42 million, quarterly operating cash flow of N/A, and quarterly free cash flow of N/A. These financial results highlight the company's ongoing commitment to advancing its technology and laying the groundwork for future commercial success. There was no year-over-year growth due to the company being in the development stage and not generating significant revenue yet.
Liquidity Net Power's strong liquidity position is evident from its cash and investment balance of $530 million as of December 31, 2024. This substantial cash reserve provides the company with a solid financial foundation to support its ongoing research and development efforts, as well as its commercialization initiatives. The company's liquidity position is crucial for funding its ambitious projects, such as Project Permian, and for weathering potential challenges in the evolving energy market.
As of December 31, 2024, Net Power had $329.23 million in cash and cash equivalents and $100 million in short-term investments. They also have access to an undrawn credit facility of $150 million. The company's debt-to-equity ratio stands at 0.005, while both its current ratio and quick ratio are 28.65, indicating a strong short-term liquidity position.
Technological Advancements and Commercialization Net Power's primary focus has been on the development and commercialization of its utility-scale power plant design, known as Gen1U. This 550 MWth plant is expected to achieve a CO2 capture rate of 97% or greater and a net LHV efficiency of up to 50% for later Gen1U units. The company is also exploring the potential of smaller, industrial-scale plants ranging from 25 MW to 115 MW net electric output capacity.
In 2024, Net Power completed the front-end engineering and design (FEED) for its first utility-scale project, dubbed Project Permian, located in West Texas. This milestone marked a significant step forward in the commercialization of the Net Power Cycle, as the FEED process identified no fatal flaws in the technology or plant design. However, the FEED process also revealed higher-than-expected costs due to the challenging site conditions and the broader inflationary pressures impacting the energy industry.
In response, Net Power has shifted its focus to a post-FEED optimization and value engineering exercise, aiming to reduce the total installed cost of Project Permian and future deployments. The company is also exploring the feasibility of modular, multi-unit projects along the Gulf Coast, which it believes will demonstrate further cost reductions and enhanced scalability.
The company's technology is supported by a portfolio of 485 issued patents as of December 31, 2024, which have been in-licensed on an exclusive, irrevocable basis. This robust intellectual property portfolio provides Net Power with a significant competitive advantage in the clean energy technology sector.
Competitive Landscape and Challenges Net Power faces competition from a variety of power generation technologies, including traditional unabated fossil fuel generation, gas generation with post-combustion carbon capture, advanced nuclear, and renewable energy sources. The company believes its unique approach, which combines clean, reliable, and affordable power generation, positions it well within this competitive landscape.
One of the key challenges the company has faced is the significant capital investment required to commercialize its technology. The estimated total installed cost for Project Permian has increased from $950 million when the company went public in 2023 to a range of $1.7 billion to $2 billion, primarily due to inflationary pressures and site-specific factors. Net Power is actively pursuing strategic partnerships and capital solutions to secure the necessary funding to bring its first utility-scale plant to fruition.
Additionally, the company must navigate the complex regulatory environment surrounding power generation, including obtaining the necessary permits and approvals, as well as complying with evolving environmental regulations. Net Power's success will depend on its ability to navigate these challenges and maintain its technological edge.
Future Outlook and Opportunities Looking ahead, Net Power is focused on three key priorities for 2025: completing the value engineering process for Project Permian, finalizing the feasibility studies for its modular, multi-unit projects along the Gulf Coast, and securing the necessary capital to commercialize its technology.
The company believes that the growing demand for reliable, clean power generation, driven by factors such as the rapid growth in AI and data center load, presents a significant opportunity for its technology. Net Power's ability to deliver clean, affordable, and dispatchable electricity can make it a valuable solution in the global energy transition.
Moreover, the company's collaboration with Baker Hughes and Woodside Energy to develop a smaller, industrial-scale Net Power solution opens up new licensing opportunities that could further expand Net Power's addressable market and diversify its revenue streams.
Net Power estimates that with $1.7 billion to $2 billion in funding today, they could complete the value optimization exercise this year, declare FID at year-end, and break ground in mid-2026 to target having the plant online in 2028. However, due to the uncertainty in raising the required capital, the company noted it is "nearly impossible to attempt to put a date on when we could reach FID." Net Power has earmarked $200 million of their current $533 million in liquidity for Project Permian and believes the current economics can support up to $600 million in project-level financing, leaving $600 million to $900 million in new capital needed to fully fund the project.
The clean energy industry is expected to grow at a CAGR of 10-15% over the next decade as nations and companies work to decarbonize their power generation. This trend bodes well for Net Power's technology and market potential.
Conclusion Net Power's innovative Net Power Cycle technology has the potential to revolutionize the power generation industry, offering a clean, reliable, and affordable solution that addresses the pressing need for sustainable energy. Despite the challenges the company has faced, its strong liquidity position, strategic partnerships, and ongoing technological advancements position it well to capitalize on the growing demand for clean energy solutions. As Net Power continues to refine its technology and commercialization strategy, investors will be closely watching the company's progress in the years to come.