Net Power Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter ended June 30, 2023. NET Power is a development-stage clean-energy technology company developing a natural-gas power process designed to capture carbon dioxide and eliminate most air emissions. The business combination closed June 8, 2023, creating separate “Predecessor” and “Successor” reporting periods; results are therefore not directly comparable without adjustment. Dollar amounts below are in millions unless noted.
Financial highlights
| Metric | Reported information |
|---|---|
| Revenue | No Successor-period revenue (June 8–30). Predecessor revenue was $0.125 for April 1–June 7, versus $0.208 for Q2 2022; January 1–June 7 revenue was $0.175 versus $0.432 for the first half of 2022. Management says revenue has not been material. |
| Profit and expenses | Successor net loss was $110.585 for June 8–30, including a $79.054 one-time related-party option settlement expense. Predecessor net loss was $17.109 for April 1–June 7 and $34.176 for January 1–June 7. Q2 2022 net loss was $13.767; first-half 2022 net loss was $25.114. Gross margin is not meaningful given minimal revenue. |
| Cash flow | Successor operating cash outflow was $35.490 for June 8–30; Predecessor operating outflow was $10.622 for January 1–June 7. Combined, the reported periods represent $46.112 of operating cash use through June 30. Successor investing cash inflow was $7.454 and financing cash inflow was $319.663. |
| Cash and liquidity | Cash was $648.645 at June 30, compared with $5.164 at December 31, 2022. Business-combination proceeds included approximately $540 million from the PIPE and approximately $135 million from the trust account. Management believes proceeds should fund the company to commercialization, but says additional funding may be needed because some costs are not reasonably estimable. |
| Debt and liabilities | No outstanding member loans or other debt are identified. Total liabilities were $180.691. They included $81.300 of warrant liabilities, $10.867 of earnout-share liability, $80.571 of deferred taxes, and $0.724 of lease liabilities. |
| Balance sheet and non-controlling interests | Total assets were $2,521.452, including $1,340.890 of developed-technology intangibles and $433.737 of goodwill. Redeemable non-controlling interests were $1,885.319, reflecting the Up-C structure and potential cash-redemption rights. |
Changes, outlook and risks
- The business combination brought substantial cash, public-company costs, and acquisition-accounting step-ups. The resulting developed-technology intangible asset is amortized over 20 years; Successor amortization was $4.110 for June 8–30.
- Operating expenses rose substantially in 2023, driven by transaction and public-company activity, increased R&D under the joint development agreement, and commercial project development. The $79.054 option settlement was a significant, one-time related-party charge.
- The company plans further testing at its 50 MWth La Porte demonstration facility and targets startup operations at its first approximately 300 MWe utility-scale plant in 2026, expected to be located at an OXY-hosted Permian Basin site. These are targets, not guarantees. Management describes early-plant net efficiency of approximately 45% and a later target of approximately 50%, with CO2 capture targeted at 97% or more.
- Commercialization depends on completing engineering, permitting, supply and offtake contracts, financing, final investment decision, EPC work, construction and commissioning. Key risks include technical or construction delays, cost overruns, supply-chain constraints, competition, customer demand, access to capital, and the ability to establish commercial-scale operations.
- The Amended and Restated JDA with Baker Hughes affiliates has total consideration of $140 million, split between cash and equity; $131.266 remained unrecognized as a commitment at June 30. The company also disclosed $3.532 remaining on a $4.700 equipment-purchase commitment.
- Management expects losses to continue through 2023 and beyond and operating cash use to increase as hiring and engineering activity expand. No specific financial revenue, profit, or cash-flow guidance is provided.
- Management reported disclosure controls and procedures were effective as of June 30, 2023, with no material change in internal control over financial reporting during the quarter.
Key facts for investors to verify
- Progress toward the 2026 utility-scale plant target, including site, permits, FEED, contracts, financing and final investment decision.
- Cash burn, remaining cash runway, projected commercialization costs, and whether additional financing will be required.
- Technical results from upcoming demonstration-plant testing and evidence supporting efficiency and CO2-capture targets.
- Related-party JDA spending and equity compensation, the large option-settlement charge, and any further material transaction or public-company costs.
- Potential dilution and changes in warrant and earnout liabilities, as well as the effects of non-controlling-interest redemption and exchanges.
- Final acquisition-date fair values: the purchase-price allocation remained subject to change during the measurement period ending one year after closing.