Flipping the switch on a first-of-its-kind plant to produce emissions-free natural gas takes many years. Many investors in Durham-based Net Power have lost their patience in the project that caught the attention of some major energy industry powers.
Shares have lost 75% since a June 2023 transaction in which the business merged with Rice Acquisition, a special-purpose acquisition company, to become publicly traded and raise capital. It closed its first day of trading at about $12 and an enterprise value of about $1.5 billion.
The stock tumbled in mid-March to less than $3 after the clean energy technology company disclosed that its first power plant would take longer to build and cost more than previously projected.
“This pause is frustrating but necessary,’’ CEO Danny Rice told investors on a conference call. The company said the cost for developing Project Permian in west Texas is now projected at $1.7 billion to $2 billion. That’s roughly double initial estimates, requiring the company to raise $600 million to $900 million to close the funding gap, Net Power said.
The company also pushed back the earliest start date for the operation near Midland, Texas, until 2029. In September, Rice was projecting a debut by the first half of 2028. In 2022, the company had projected commercialization in 2026.
In mid-April, Rice fired Net Power’s president and chief financial officer, and promoted Marc Horstman to the chief operating officer role.
TEXAS TANGO
In an investor’s presentation last fall, Net Power estimated capital expenditures of about $805 million for the plant. Inflation, supply chain constraints and other factors have pushed costs higher, leading to a site plan reduction of 25% in an “optimization and value engineering process” started in January.
Peculiarities with the Texas site have also created a more expensive project. While natural gas underground is plentiful, it contains more nitrogen than other North American basins. That requires added spending on purification equipment.
Also, some equipment and materials shipped from Texas ports to the site are too heavy to cross some bridges and go under some transmission lines. Weight and size regulations require smaller truck and rail shipments in some cases, raising costs.
Since its start 15 years ago, Net Power has sought to commercialize the generation of emissions-free power from conventional fossil fuels.
The business was co-founded by former Duke University Law School professor Bill Brown in 2009 and his affiliated 8 Rivers Capital clean-energy investment firm. Brown now heads a New York investment firm and is not a Net Power employee or director.
The company describes Project Permian as “the first-of-its-kind, large-scale, fully integrated clean gas power plant.”
That thesis has impressed energy-sector powers, including Baker Hughes, Constellation Energy and, most notably, Houston-based Occidental Petroleum, which owned about 42% of Net Power shares through its Oxy Low Carbon Ventures unit, according to last year’s proxy. Oxy had revenue of $27 billion last year, and is nearly 30% owned by Warren Buffett’s Berkshire Hathaway.
On its website, Oxy said Net Power’s “low-cost, near-zero-emission facilities will have the potential to deliver 24/7 dispatchable clean power that is cost effective with limited land use.’’ Oxy executive James Bennett chairs the company’s board.
Net Power ended 2024 with cash and investments of $553 million, after reporting cumulative net losses of about $250 million over the past four years. It has minimal long-term debt.
Citing “a challenging yet opportunity-rich market,” the company said its liquidity provides “significant financial resources to optimize its technology and establish strategic partnerships to fund its first utility-scale project and future multi-unit deployments.”
Still, the pace of Net Power’s development costs “may have some shareholders thinking ahead to when the company may need to raise more cash,’’ the Simply Wall Street research firm wrote in March.
Rice has excelled in past ventures, leading Rice Energy through its $1 billion initial public offering in 2014 and eventual $8.2 billion sale to EQT in 2017. He also led Rice Midstream Partners, which was acquired by EQT Midstream Partners for $2.4 billion in 2018.
Net Power “will be ready to go this decade if we can get costs down and create a viable pathway to economic commercialization,’’ he told investors in March. “We think we’re years ahead of competing technologies.’’ ■
