NET Power Inc. (NPWR) Earnings Call Transcript

Thanks, and good morning to all of you. It's a pleasure to welcome everyone to NET Power's earnings conference call for the second quarter of 2026. Joining us today are Danny Rice, our Chief Executive Officer; Marc Horstman, our President and Chief Operating Officer; and Lee Shuman, our Chief Financial Officer. Our earnings release covering the second quarter, which concluded on June 30, 2026, was put out yesterday, and you can find it on our Investor Relations site at ir.netpower.com. Before we go further, please note that forward-looking statements will be part of what we discuss today. Because of risks and uncertainties tied to our business — details of which appear in our SEC filings — actual results could differ materially from what those statements state or imply. We undertake no duty to revise any forward-looking statements. You can find a complete discussion of these risks in the company's latest annual report on Form 10-K, along with the quarterly report on Form 10-Q covering the quarter that ended June 30, 2026, both of which have been filed with the SEC. Having said that, I'll hand things over to Danny Rice, NET Power's Chief Executive Officer.

Thanks for that, Bryce, and hello everyone. I'm glad you could join us this morning. During the last four months, we've been hard at work on a thorough effort centered on our customers and our marketing. We spoke with many different kinds of possible power buyers — the hyperscalers, the developers of data centers, and ordinary industrial firms seeking to buy power — and what they told us came through loud and clear. Speed, scale, and reliability are what the market needs, and it's willing to pay a reasonable price to obtain them. Given how scarce it is to deliver reliable power at scale quickly — something I think we'd all agree is essential to the U.S. — To come out on top in the AI competition, the tech sector must direct far more funding right now toward cracking that challenge. With NET Power, then, I'd say we stand apart, since under the layer of our clean gas technology lies a core grasp of everything related to gas power generation—covering the machinery as well as the expertise about which locations work well for these installations on behalf of end customers. The market's message to us was that our 80-megawatt clean gas offering carries real credibility, yet what customers truly require is substantially greater capacity, delivered faster. In our view, decarbonization matters, yet as has consistently been the case, it will arrive on a large scale only after the fundamental energy foundations society depends on—power that is dependable and within reach financially—are entirely established. Right now, the amount of power people need is greater than what we can provide. That means we have to pause and rethink how we're using our money and our people, so we can address these essential energy requirements and still keep the capability for what we set out to do from the start — turning natural gas into clean firm power at the lowest possible cost. That remains our guiding principle. So shifting to prioritize unabated power first is just a more practical and probably less risky route to ultimately reach a cleaner energy future. That said, this doesn't mean we're making a call on how much CCS will matter down the road. We have faith in it, and it does the job. A few weeks back, the Entropy team brought the first clean gas power plant in the world online in Canada — a major industry milestone. Meanwhile, in the Permian Basin, we see annual CO2 demand for EOR reaching tens of billions of tons. With oil prices climbing, as they have lately, the need for CO2 keeps expanding. So let me take a moment to explain why this strategic recalibration, in our view, is built to last; we see it as a sensible answer to a structural market reality that we expect to persist for many years. Data center expansion is now running up against the grid, which has rapidly turned into a limiting factor. To start, this pattern shows up in places such as PJM and MISO, though it has also spread quickly into ERCOT. What's notable is that many people working in this sector once saw ERCOT as a dependable refuge when it came to getting power fast. That assumption largely rang true for quite a while—you'd wait less, the grid proved steadier, and electricity came at a lower cost. Still, my sense is that Texas was never really positioned to handle the enormous surge in demand that's now showing up. Because of that, ERCOT's waiting lines continue to push farther into the future, reaching the 2030s at this point, and nobody can say with confidence when new generation will at last catch up to this unprecedented need. That reality is pushing people to get inventive about how they get electricity into the market. What we're overwhelmingly hearing back is that approaches such as behind the meter, on-site generation paired with focused reliability have emerged as the most workable short-term answer available. We consider our company a piece of that broader ecosystem. The location is ours, the Oxy land connection is ours, and our technical know-how lets us provide firm dispatchable power at scale. That's precisely what today's market requires, and in our view putting capital to work this way benefits shareholders and the power sector equally. When it comes to grid constraints, those are also a top worry for nearby residents. During the last several months, we've paid careful attention to local and national discussions about data center growth—the activity in the Texas legislature, the talk of moratoriums, the close examination of water usage and grid effects, plus the wide-ranging questions from many different communities about this novel form of infrastructure. These concerns come from actual communities and are legitimate, and they warrant genuine answers. The mounting pressure surrounding traditional data center buildout, if anything, is speeding up appetite for the type of thing we aim to construct: behind the meter and entirely off-grid power options that place no strain on the grid, never wait in an interconnection queue, and are positioned and engineered so carbon capture may be incorporated as time goes on. That isn't merely commercially appealing—it's the sort of project that offers a solid reply to a regulator or a community raising tough questions. At each stage of Project Permian's development and evolution, we've aimed to be a good neighbor striving to bring lasting value to the communities where we live and work. Based on everything we've laid out, we see these worries as pointing toward our updated approach, not as a reason to abandon it. Given that backdrop, we've now shaped our commercial strategy around the three things today's power customers value above all else: how fast they can get power, how dependable it is, and how much of it they can get. The way we deliver on that is through natural gas plants located right next to the customer's load and capable of being brought online in short order. So we're redirecting near-term spending and execution focus toward expanding our unabated natural gas generation capacity, while keeping carbon capture available as an option—one that's credible and substantial, held in reserve so it can be folded into projects step by step, depending on what customers need, how the project economics work, and what financing is available. In fact, we believe this strategy will set us apart increasingly over time, especially once supply catches up with demand and attention starts returning to discovering inexpensive methods for decarbonizing the country's recently added power generation fleet. What matters most is having the capability to pull this off, and that's something we'll keep, along with having projects located in places where carbon capture is both technically and geologically viable. So allow me to go deeper on how this affects our projects and partnerships. Project Permian, our West Texas location, is undergoing a redesign for colocated demand. Given the market feedback we're seeing right now, we don't anticipate deploying post-combustion carbon capture during the first phase of deployment. The design keeps open the option to introduce capture during subsequent phases, the location is suitable, and the Oxy arrangement for CO2 offtake through enhanced oil recovery stays in place as a potential route down the road. What we aren't doing is making customers pay for clean power before they've requested it. The site can support roughly 1 to 1.5 gigawatts of generation spread over several phases, and the first phase is being scaled to match what the market will actually sign contracts for at present. Regarding our relationship with Entropy, we're talking through a revised framework through which the parties might pursue deploying Entropy's post-combustion capture technology during later phases of NET Power's projects, whenever customer demand, economics and financing support it. However, at this point it simply wouldn't be sensible for us to put capital behind something that can't be acted on yet. So our aim is to maintain the relationship and the excellent work our teams have already accomplished together; that work has generated considerable insight into project design that can accommodate carbon capture, ensuring the retrofit option factors into broader power site design. Clean power stays a long-term objective. Our North Star is unchanged, but the sequence of steps has shifted. We build the power first, much of it on a faster schedule, to serve customers' needs today, and we capture when it's sensible; so I'll hand things to Marc for a quick operational update, and then Lee will walk through the financials. Marc?

Thanks, Danny. Good morning, everyone. I'll keep this brief. We're shifting our focus in project execution toward continuous generation sited behind the meter — in other words, firm power at three nines of reliability, or 99.9% uptime, which means the plant would only sit idle for a few hours each year. That gets placed alongside customer loads on the 2028 timeline that the market is requesting. For Project Permian and other locations, the design we're working on brings together battery energy storage, reciprocating engines and gas turbines, so redundancy is baked in — meaning one unit going down or undergoing scheduled maintenance won't strip away power the customer urgently needs and depends on. Based on our modeling to date, a single large unit on its own can't reach a three 9s target, since scheduled maintenance alone would exceed the allowed outage budget. The path to that target runs through combining multiple smaller units, and that's the direction the wider market has taken. On the commercial side, we're engaging hyperscalers and the developers building their data centers directly, with our pitch centered on how fast we can deliver power and our access to land, aligning our power development timeline with the customer's campus construction so the two proceed as coordinated parallel work streams, while the design keeps open the possibility of adding post-combustion capture down the road. Alongside a prospective client, we're trying to lock down another 120 megawatts' worth of gas-powered equipment that can be delivered early. If we add that to the gas turbines we've already got secured, the total capacity we'd have lined up for phase one of this bigger project comes to just about 200 megawatts. Working with Oxy continues to set us apart in a meaningful way. Having land in multiple locations throughout West Texas gives us exactly the sort of scalability that the biggest data center companies keep requesting. Right now we're pushing hard with Oxy on getting land rights squared away for our power development, and that's something we want to get done soon. On that note, I'll pass things over to Lee.

Appreciate that, Marc. Morning, everyone. Let me give you a brief look at where we stand financially. The second quarter closed out with roughly $310 million across cash, cash equivalents and investments, and we carry no debt. As things stand, our cash is enough to keep ongoing operations and development work at Project Permian moving, along with some of the equipment needed there. That said, getting the project all the way through construction to commercial operations is going to take project level financing, capital from partners, more equity, or some mix of those options. We stay hopeful that we can bring in the capital required to finish the project. Having this balance sheet means we've got the runway to move through this process deliberately. Each dollar we spend gets weighed against what's needed to reach a fundable project, and we continue — and that's how we're running the business; with that, I'll pass it to the operator for Q&A.

Could you expand a little, beyond what you already said, on the way you're thinking about NET Power's strategic position over the longer haul, given this new emphasis? More precisely, how do you see the places where NET Power comes out ahead of other developers who are likewise working to deliver electricity to the grid in West Texas?

Sure, Nate, that's a fair question. I'd say if you simply take a broader view and examine the current market, there are really two possible stages we're dealing with. The stage we find ourselves in today, I believe, is clearly one of shortage; what I mean by that is that we aren't building enough generation capacity. One thing we constantly ask ourselves is: what is our edge, what sets us apart from everyone else. Once markets ultimately reach something like stability and sit at equilibrium, my view is you absolutely need some kind of strategic point of distinction relative to your competitors — but that isn't the market we're in. Ours is a market with very, very tight supply; and creating value doesn't have to come out of being different; it has to come out of simply having the capabilities to satisfy what the market is asking for. That's among the things we heard, I'd say, clearly and unmistakably during the past few months: sure, the clean aspect is genuinely compelling, but what's truly needed is simply a great deal more power, delivered more quickly, and if you have the capital — both the intellectual and human capital and the financial capital — plus the means to pull that off, that's where we'd like you putting your capital to work. So from our present position, the market is desperately short on power. If you're capable of delivering that, it adds value, it generates value. And looking further out, once the market truly settles — meaning once supply has been constructed enough to bring reliability back to the grid, once everyone's fundamental electricity needs are satisfied, which we'd contend is right on the verge of occurring — once you reach that kind of parity, that's the moment you genuinely must scrutinize what makes you strategically distinct from everyone else; so when we consider this shift away from today's short-power market, our ability to deploy the unabated power gives us the chance to generate enormous value thanks to that shortage. So when we move into that market, let's say 10, 15 years out, where things have reached equilibrium, I believe that's the point where this fundamental advantage of taking carbon out of gas-fired power generation truly turns into the differentiator. That's exactly why it matters to us that we keep holding onto it — keep preserving it. And the simplest way for us to preserve it is by making sure our projects land in places where sequestration can happen. So I don't think you'd find us heading into spots where capturing and sequestering the CO2 simply isn't feasible. But what's great about West Texas, particularly since you aren't giving up anything on the merits of unabated gas power, is that the natural gas is abundant and the land availability is unmatched there. So if you're considering locations for unabated gas power generation alone, West Texas is phenomenal. And once you factor in what will unfold in 5, 10, or 15 years, when the clean aspect starts drawing attention again, you'll want to be situated where you can take the assets you already have and decarbonize them. So for us, this West Texas site genuinely lands in both categories: we can leverage the assets we own to serve what the market needs right now and generate value, all while keeping the optionality intact, plus the genuine intent and capacity to decarbonize and truly exercise the distinctive capabilities we have that set us apart from the wider market.

Understood — that's very clear. Then you mentioned the talks with customers that prompted this shift. Given all the discussions you've already had, how might we view the route and schedule from now until we have offtake agreements signed?

Right. What I'd say is those discussions are ongoing right now. Like Marc mentioned in his remarks, we're currently working on lining up more power equipment so we can serve these customers' electricity requirements. So we aren't going out on speculation the way we did with the initial generation units we obtained last year; that was mainly meant to get us started so we could pursue the PTC, but now we can take that asset and build on it as the foundation for phase one at the Project Permian location; therefore this upcoming batch of megawatts we're arranging is being done at the request of one of the potential customers we're hoping to serve; so there's no guesswork on our end. We're simply doing this alongside them. So with any luck, within the next 2 months, we'll be able to say more. Still, I'd say the truth is that this project ultimately succeeds only if every possible stakeholder stays in agreement, which means the community aspect will matter greatly, so we want to be certain we're proceeding on the right schedule and sharing information properly as things develop.

I was just wondering — when you look at the conversations you've been having with possible off-takers, and given that data center buildout accounts for such a large share of the added demand, would you say the folks you're negotiating with tend to be at the early project origination phase? Or do they mostly already have considerable momentum along the development path, such that perhaps at the moment they kicked things off, problems like interconnection hold-ups and so forth weren't nearly as obvious as they are today?

Yes. Noel, when you ask that, do you mean our own project in particular? Or are you referring to the prospective customers' projects more broadly?

Projects from prospective clients.

Yeah. What I'd say is, take our West Texas location as an example — its positioning is pretty unique. And it isn't only that single site; initially we figured this would be a project tied to the grid, yet with everyone now genuinely worried about grid dependability, what's happened has been remarkable even somewhere like Texas — for several years Texas has served as a secure refuge for people, which explains the surge in interconnect requests into ERCOT. Yet with ERCOT now signaling that additional supply isn't arriving quickly enough, I believe that's making folks hesitate about projects connected to the grid, and I think everyone is beginning to seize control themselves, saying that if the grid can't be trusted, we need to be largely self-reliant. That plays right into the behind-the-meter, off-grid style of model; and this is mostly coincidental, but it genuinely lines up with what we were doing regarding the PCC portion, which meant beginning with the smaller gas turbine units, not pursuing the large ones right away; so we were truly building this kind of site around smaller gas turbine units, which, as Marc mentioned during his prepared remarks, once you combine a number of smaller units, you can achieve a far greater reliability factor, one much better suited to this behind-the-meter use. And if instead you had a single large frame turbine putting out 400 megawatts, you'd need an enormous amount of redundancy, since you'd face a huge, huge risk from one single point of failure. So we've essentially been engineering this for the PCC, yet it also suits dropping the PCC and keeping reliability in this behind-the-meter kind of use; so I believe the design we'd been developing for the PCC portion in fact performs extremely well in the unabated version. The sole meaningful distinction is that instead of devoting an additional 2x on the PCC portion, we're able to direct that capital toward basically doubling installed megawatts for the behind-the-meter off-grid use. So that's been the largest part of what the market has told us — the response has essentially been that you folks possess the gas expertise, you're somewhat choosing the tougher path by also handling the PCC, so direct that capital toward what's needed at this moment, which is the greatest amount of firm, reliable power generation on a sped-up schedule that you can provide. All right, so that input from the market has been absorbed, and alongside this prospective client we're acting on it, lining up more turbines — or rather more power equipment — so their electricity requirements can be satisfied on a faster schedule. From the NET Power side, I'd say everyone is reasonably on the same page regarding this approach. What matters most to us is keeping that carbon capture option open, since we're pretty sure it will return at some point down the road, and once that happens we have to be prepared.

Thanks. And when you think about what lies ahead, what's your estimate for how long this tight supply condition could persist while utilities and the grid work to expand their interconnection capabilities? Some folks have suggested it could be roughly 5 years, or that worldwide manufacturing of gas turbines might scale up enough to better match near-term requirements. When you examined this, did you form a range for the possible duration of the shortage? I was also curious whether you have both a shorter-horizon view and a longer-horizon view of how that stretch of time would play out.