Greetings and welcome to the NET Power Third Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Bryce Mendes, Director, Investor Relations. Thank you. You may begin.

Good morning and welcome to NET Power's third 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. Yesterday, we issued our earnings release for the third 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'll now pass it over to Danny Rice, NET Power's Chief Executive Officer.

Good morning everybody and thanks for joining us. The team has some positive updates for you today. And as we've done on previous calls, I'll provide some overview comments before passing it over to Brian and Akash for the operational and financial updates. We continue to focus our efforts on developing and improving our technology at the utility-scale, which starts with Baker Hughes' validation testing at our La Porte facility. We recently kicked off Phase 1 of our equipment validation program with Baker at La Porte, which will result in the down selection of the oxy-fuel burner. I'd like to extend a big thanks to our site team and operational partners for their hard work in getting us to this point. We celebrate this milestone as it marks a critical step towards developing and improving our technology at the utility-scale and we look forward to progressing through our outlined four-phase testing program at La Porte with Baker Hughes now through 2026. We're excited to announce the selection of Air Liquide as our air separation supplier for Project Permian FEED, marking another significant milestone for the team. The air separation unit represents one of the major equipment components of the NET Power plant. We look forward to working alongside the Air Liquide team on Project Permian and future opportunities as we continue to build out our standardized NET Power plant design. Shifting gears, we held an Investor Day in early September where we outlined a recent market study conducted in collaboration with Boston Consulting Group. In summary, the opportunity set for 24/7 low-carbon energy is immense and our targeted North American competitive markets of MISO, ERCOT, PJM, CAISO, and AESO, we view the serviceable opportunity is as high as 2,000 NET Power plants, focusing on the areas with sufficient CO2 storage…

Thanks, Danny. I would like to echo Danny's sentiment and congratulate our La Porte team and our partners that have worked tirelessly this last year to upgrade the facility and begin plant and combustor test rig commissioning for Phase 1 of the Baker Hughes validation campaigns. Thanks to the Baker Hughes team, and thanks to Constellation's site staff and leadership team that supported us. Together, we manage a set of highly skilled contractors and craft that worked over 140,000 hours to complete these upgrades, all while working safely with no recordable injuries. They installed several new pieces of major equipment, welded over 2,000 feet of stainless steel piping and installed approximately 80 new instruments and over a dozen new valves to improve the facility's operational flexibility for the upcoming campaigns. It is worth noting that while the initial validation campaigns are targeted towards Baker Hughes combustion system, NET Power will benefit immensely from the overall plant's operation. We have incorporated lessons learned from prior testing, not only in the physical facility design, but in the control system and way we collect and utilize our plant data. The additional plant data will allow us to further improve our plant operations and to calibrate our process simulation models that were the original basis of the plant design. Our goal is to develop highly accurate digital twin virtual models of our demonstration plant at La Porte and our utility-scale plants like Project Permian. We can then apply AI machine learning algorithms to the digital twin to help our engineers more rapidly improve our plant design and performance. Turning to slide 10. The operations team is executing on schedule against our highlighted equipment validation campaigns with Baker Hughes. The first two phases of equipment validation are being conducted in a Baker Hughes combustor test…

Thanks, Brian. As mentioned in Brian's comments, Zachry's estimating team is hard at work preparing the total cost roll-up for Project Permian which we expect to receive in December. This initial estimate will be subject to review and negotiation prior to the EPC contract being executed. Similar to other market participants, we expect to see continued inflation in capital equipment and construction costs compared to our previously provided guidance of $1.1 billion for Project Permian. Importantly, we also expect this inflation will be offset by the continued improvement in the market price for clean reliable power. We are in active negotiations for Project Permian's key supply and offtakes and look forward to sharing more information as they are finalized. Additionally, we continue to work with our existing owner group on the capital formation for Project Permian which we expect to finalize after fee conclusion and supply and offtake agreements. Moving to slide 14. NET Power continues to prudently deploy our capital ending the third quarter of 2024 with approximately $580 million of cash and investments. In the third quarter, our cash flow used in operations was approximately $8 million which included a cash payment of approximately $5 million under the Baker Hughes JDA. As mentioned previously, we expect cash flow used in operations to continue increasing as we build out the organization progress the joint development program with Baker Hughes and ramp up activity at La Porte. For the quarter, our total capital expenditures were approximately $22 million comprised of approximately $10 million of capitalized costs associated with ongoing Project Permian development activities and approximately $13 million spent on La Porte modifications and upgrades ahead of testing. NET Power's fully diluted share count was approximately 249 million shares as of September 30. This was comprised of approximately 215 Class A and Class B vested shares, 19.5 million shares issuable upon the exercise of outstanding public and private warrants, which if exercised would give NET Power an additional $225 million of cash, 2.7 million shares subject to earn-outs or vesting requirements and approximately 11.5 million authorized shares issuable pursuant to the joint development agreement with Baker Hughes. For a detailed breakdown of our diluted share count, please refer to our annual and quarterly financials on file with the SEC. That concludes our prepared remarks. I'll now pass it back to the operator to open up the line for Q&A. Thanks,

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question is coming from the line of Thomas Meric with Janney Montgomery Scott. Please proceed with your questions.

Yes. Good morning. Thanks for the time. A couple of questions. I'll start with kind of integrating multiple NET Power plants on a single site. Just curious if you can walk through both the opportunities for cost savings and just the challenges of integrating multiple plants things like shared control rooms, CO2 export compression, ASU those types of things? And then I have a follow-up on the capital equipment inflation.

Yes. Hey, Thomas, this is Danny. Good to have you on today. I think I'll cover sort of just like the economic proposition and then Brian can cover some of just the technical operational nuances of it. I think as we look at Project Permian the first plant it's going to be first of a kind the most expensive plant we ever built and it's going to be a single unit. I think as we look at just getting down the cost down curve the CapEx curve for all future plants those capital improvements are really going to come from a combination of just getting into manufacturing mode and deploying more of these plants, just continuous improvement in iterations from one generation to the next. But we really do see like the largest cost savings in terms of overnight cost of a new -- NET Power plant is really going to come from being able to deploy multiple plants together in a fleet configuration. So I think like the nice thing for us sitting here today is not only is it more economic for us to deploy multiple plants together, but it's also what the market is looking for in terms of just new load growth. And not just load growth across an entire region, but load growth at a concentrated site where one location could see demand for a gigawatt or a couple of gigawatts of power. And so what we're really doing now on the origination side is it's really increased that filter level of the scope and the size of the sites that we're looking for are becoming a little bit bigger. I think the nice thing for us is we're starting with such a small footprint. We're talking about 15 acres for each of these plants.…

Yes. Thanks, Danny. I think you covered it well. Just a few other points is it's not always – if you're doing multiple plants side-by-side, it's not always necessarily scaling up the equipment. So we would foresee of course, it's the same turboexpander, it's the same compressors pumps but there is significant construction savings just for the EPC to do duplicate powertrains. And this plays out in the power industry when you do let's say, a combined cycle plant and you're doing multiple turbines that are the same. There's just significant learnings on the site and spreading of let's say, your overhead indirect construction costs across a larger facility. So – and then as you said in the question, there are some items that don't duplicate. You're still going to have one control room and one set of water treatment. So there are pure savings by combining multiple plants with the same site. And then in other cases it's savings on construction doing project-over-project.

Thanks Helpful for both of those. And then on the inflation of capital equipment just curious on a couple of things. First is it electrical equipment and broad-based across other components that you need, pipes valves, fittings, et cetera? And then is it – are you seeing it more on manufactured finished products or are you also seeing it on the upstream materials for those goods? And that's it for me. Thank you.

Yes, it's Danny, I'll take that. I mean right now what we're getting quotes for directly is the large engineered equipment. So definitely we're seeing it there. If you look at heat exchangers, turbomachinery, electrical equipment, those are the things that we've been either purchasing long leads or getting indicative quotes with our partners. In terms of the bulk all of that will be coming through really the Zachry, FEED. So we anticipate, whether it's pipes fittings, valves, all the smaller commodities that will come through that FEED estimate. We do anticipate increases but can't really put an exact number on that at this point.

Yes. And the only other thing I'd add to that is, we do have a playbook on negotiating for these things. So we have received indicatives. We have still to go through the negotiating process. So there's more that, we can really say on that point.

Thank you. Our next question is coming from the line of Betty Jiang with Barclays. Please proceed with your questions.

Hi. Good morning. So I want to ask about this oxygen storage opportunity here. One, just help us frame -- you talked about one day of extra oxygen storage is equating to I think 1.2 gigawatt hours. Just how much -- like how much spare capacity is currently baked into the base power plant design to generate that excess oxygen currently? Or is that a separate design decision that you have to make from the get-go to add in that optionality initially?

Yeah. Betty thanks for the question. Let me turn it over to Brian, to give you just some of the high-level things. I would say before I do, it really does become a very customizable sort of decision of how much storage do you want to have on-site and how much excess oxygen do you want to be able to produce in order to recharge the battery storage. So it really is going to be on an application-by-application basis. How quickly do you want to recharge. And how quickly do you want to -- how much -- how many hours or days of storage do you want to have? Brian, any …

Yeah.

…nuances you want to add to it?

Yeah. Sure. So the oxygen storage is inherent, in our cycle. We use gaseous oxygen, but we would store liquid oxygen, as let's say, back-up. So there always will be some liquid oxygen tank at the site. It's just a question of how do you size it for the minimum, we would need just for back-up redundancy for start-up and so forth or do you oversize it for the storage mechanism. And that's why we put a range on the slide that you saw of 10% to 25% of baseload. So as Danny said, we'll work with each application including on Permian. We're considering this right now in our FEED, how much we would potentially want to oversize the locks tank. But yeah, it really comes down to, how you would treat a battery? How you would look at the economics and payback of charging and discharging? So it can be oversized. Of course it takes energy to fill it, which would affect your baseload capacity. So this will be something we look at application-by-application.

No. That's helpful. So maybe thinking through the economic side of this solution, would you be thinking about monetizing this separately, one as a single NET Power plant, but the baseload is being monetized separately from the peak power?

Right. Yeah, Betty, I think if you think about it through the lens of just selling a license to build a NET Power plant from our perspective, the customer is really going to look at what's the total intrinsic value of the NET Power plant. I think everything that we've really been doing internally to-date has really been focused on the baseload power output of this facility. And we really haven't been trying to ascribe much value to this peaking supplement, which doesn't eat into the baseload. It's really just supplemental to it. I think now that we kind of see what's kind of happening in the market where you're starting to see these data centers trying to put their power on to these grid systems, you're starting to see a lot of reluctance and just resistance from a lot of these system operators both on front of the meter, but also on the behind the meter co-located situations. This sort of peaking capability that we can provide to the grid for their benefit, while at the same time servicing the co-located data center really is a solution where I think everybody gets what they want. The data center gets their 24/7 power, 365 days a year for a set amount of power. And at the same time the grid gets the dispatchable peaking power that it needs to be able to meet its night time power load, really as you look at just the cycling of renewables from daytime to night time. That's what the grid needs is that sort of dispatchable response power. And so right now I think there's a little bit of a logjam with what's happening on the data center side both within the RTOs, but also at FERC where they're really trying to figure…

Okay. Thank you very much for that color.

Our next question is coming from the line of Pavel Molchanov with Raymond James. please proceed with your question.

Yes. Thanks for taking the question. In your prepared remarks, you gave some thoughts kind of post election. I wanted to zoom in specifically on 45Q. Obviously, there will be some conversations in Congress about making changes to the Inflation Reduction Act potentially cutting some of the stuff out of there. Any concerns that 45Q might be on the proverbial chopping block?

Yes. No, it's a great question, Pavel, and it's good to have you on the call with us today. No, not really. I think when we look at all of the things that are eligible for the IRA and what things really kind of become those bipartisan solutions. I would say, carbon capture is probably near the top of that list, because I think if you take a step back and look at what carbon capture enables us to do. One, it's -- we think it's the most impactful way to be able to decarbonize. And I think if you look at just what NET Power is able to offer just being able to replace every existing coal-fired power plant and carbon emitting natural gas power plant in the United States with a NET Power plant you've eliminated total CO2 emissions from U.S. power generation. And that is the largest source of emissions in the United States is from power generation. So it is the most impactful thing to be able to decarbonize. And so that's certainly one thing that pleases certainly, one side of the aisle more than the other. But I think more importantly, especially within this new administration, NET Power is a unique technology in that it actually leverages fossil fuels. And I think, if you look at everything that Trump has been advocating for it's increasing fossil fuel development, in order to be able to lower energy prices to consumers. And so NET Power, it's a natural gas-fired power plant. So we actually use that feedstock to our benefit. And certainly, within the 45Q, it's not just using natural gas, but it's developing new wells using the natural gas and the oil industry to be able to do that work for us. And so, carbon capture…

Yes. I would say, our primary effort, especially, because we're really focused on the origination, front origination really is focused around North America. And the reason is fairly simple. North America is the market, where these plants probably have the highest intrinsic value, and it's a function of access to the lowest cost natural gas in the world, access to great CO2 sequestration potential where there is tangible value in the form of the carbon incentives from the programs like the 45Q or from a carbon tax like you have up in Alberta Canada. And so, North America is just a place where these plants have not just like the highest intrinsic value, but it's also like just the largest markets for us to be able to scale and go after. So, North America, is certainly our priority. But as we look at some of these other markets around the world, that are really interesting to us, Australia is starting to pick-up steam, in terms of interest over there. Southeast Asia, is a little bit interesting. I think the bigger challenge there right now, is really figuring out where are they going to get access to really low-cost natural gas, and what are they going to do on the sequestration side. And so as the market just continues to mature, we're really going to be focused on scaling up here in the United States. And then as we've mentioned before, conversations in the Middle East are progressing. The Middle East is an interesting place just because they really do have some of the lowest cost gas on the planet and they do have major power ambitions that just continue to scale. The biggest thing over there is there going to be an incentive on the sequestration side that you can get paid for the sequestration rather than just allowing the free market to put a price on or a value on it. So these other markets are interesting. Europe just needs to get its Energy Act together altogether. But as they do that it will certainly -- I think it will certainly lead people to see that solutions like NET Power are going to be the lowest cost 24/7 clean power solution. It's just taking a lot of these countries a little bit more time to be able to get there really to be able to compete with the economics of projects here in the United States and Canada. So we're focused we think in the absolute right markets the absolute biggest markets. And it's nice that this US-based technology is going to be not just commercialized here in the US but it's going to be scaled here in the US and Canada really for the benefit of global deployments further down the line.

Thanks very much.

Thanks, Pavel.

[Operator Instructions] I'm not showing any further questions. Sorry about that. Our next question is coming from the line of Noel Parks with Tuohy Brothers. Please proceed with your question.

Hi. Good morning.

Hi, Noel.

Just a couple of things. One I was wondering about you mentioned that -- or one thing I've been thinking about is, of the various types of partnerships that you already have in place and some of them extending to additional regions, is there any value in direct partnership with gas infrastructure or pipeline players? Because I'm assuming there are some sites with pretty ready access to the gas supply that you'd need others where upgrades or expansions might be necessary. So just wondering if that fit into the picture where you are now.

Yes, it totally does. I think when we create that picture of like all of the potential strategic stakeholders that need to come together or that would want to come together as part of these NET Power hubs, certainly, like the gas supply piece is a big one, right? I think one of the interesting things that you're seeing in the space is the folks that do a lot of the gas transportation whether it's through existing long-haul interstate pipelines or just the regional gathering systems in some of these basins where we're looking to deploy these plants a lot of those midstream companies are now starting to figure out, I have a tangential skill set in providing CO2 transportation and sequestration. So a lot of the conversations that we're having with folks on the gas supply that happen to have just that regional presence. They're also looking at how can we twin these lines with the CO2 line, because it's a skill set they have with being able to construct and operate gas transportation facilities and CO2 is not terribly different. So the conversations that we're having with folks on the gas supply side, I would say in many of those instances, we're also having similar conversations with them about being able to provide the transportation and sequestration of the CO2 as well. So, it's that dual skill set that they provide just to be able to do both. And it just becomes another way for them to be able to create value alongside us within some of these hubs. Does that make sense?

It does. It's really interesting. Is there the potential for any of those to sort of provide capital for those -- for example for twining the lines or is it more of an arm's length sort of vendor situation they would be looking to do?

No, I think they will be more strategic with constructing new assets, upgrading -- increasing the capacity of certain assets.

And I think that's just one of like the beauties of NET Power is, our plants will be able to increase new demand for natural gas in certain areas that can justify increasing the size of the gas pipeline, while at the same time justifying and being able to underwrite the construction of a CO2 line just given the volumes that we're talking about coming from our plants. I mean, it's a lot of CO2 that we're capturing, nearly 900,000 tons for each of these plants. And so, if you're talking -- if we're talking about a fleet configuration of 4 to 10 NET Power plants, you're talking about 3.5 million to 9 million tons of CO2 per year. And 3.5 million to 9 million tons of CO2 per year, you can justify building a 200 to 500 mile pipeline, which is a really, really big pipeline. Obviously, if we do it right, we're putting these plants right on top of the sink. We're really not going to have to build that much CO2 infrastructure. But as we talked about deploying NET Power plants across like the Southeast of the United States, where there's no great place to store the CO2, you're going to have to build a CO2 pipeline to be able to get that CO2 either back to the Gulf Coast or to the Midwest. And so you're going to need volume to be able to underwrite those investments. And so, NET Power is going to be one of those solutions that's going to be able to help catalyze new infrastructure to be able to decarbonize some of these areas that may not be right on top of these geologic sinks. So, I think it does become very strategic and collaborative between us and the gas infrastructure players. They certainly want to see increased demand for natural gas. And we can provide not only that, but we could provide another revenue line for them which is the CO2 transport and sequestration on the back end of the plant, so really, really strategic and symbiotic sort of relationship between us and the gas infrastructure players.

Thanks. Its great to hear. That’s all I had.

Thank you. I'm showing no further questions at this time. I'd now like to hand the call back over to Danny Rice for any closing comments.

Okay. Thank you everybody for joining us today. We're busy at work. We're excited with this testing that we're starting with Baker right now. A lot of things coming on the pike. The open book estimate from Zachry will be coming back later this year. So I look forward to get back with you in the beginning of next year to provide additional updates on our path towards commercialization of this one of a kind technology that we think will be coming to market way before anything else. So, we have our heads down just focused on executing this plan, commercializing this technology and changing the world. So, appreciate your support, appreciate your participation and we will chat soon. Thank you.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.