NET Power Inc (NPWR) 2023 Q4 法說會逐字稿

Greetings and welcome to NET Power Incorporated fourth quarter and year end 2023 earnings conference call. (Operator Instructions) As a reminder, this conference is being recorded. At this time, I'll turn the conference over to Bryce Mendes, Director of Investor Relations. Mr. Mendes, you may now begin your presentation.

Good morning, everyone, and welcome to NET Power's fourth quarter and year end 2023 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 fourth quarter and year end 2023, which can be found on our Investor Relations website, along with this presentation on 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 Daniel Rice, NET Power's Chief Executive Officer.

Thanks, Bryce. Hi, everyone. Thanks for joining us today. I'll provide some thoughts on the encouraging macro setup for NET Power and how it plays into our three pillar corporate strategy. I'll recap 2023 highlights, and I'll share what's in store for 2024. And then I'll hand it over to Brian and Akash for operational financial updates.

Starting with the macro, we continue to see very positive signals that future load profiles will require more low-carbon generation for two distinct but related applications. First generation that can load followed to balance intermittent renewables while in other instances serving as 24/7 clean, reliable power for baseload industrial and behind-the-meter applications.

What makes NET Power very attractive is that our power plan is designed to serve both of these growing markets and because of low-cost natural gas is the feedstock to our patented process, we believe NET Power plants will be the lowest cost option to do so for both. Anecdotally, our first plant Project Permian, which will inevitably and unsurprisingly be the most expensive plant we ever build, is expected to have a lower levelized cost per kilowatt hour than new nuclear, new geothermal, and new hydro.

And as we move from Project Permian to SN-2 and into full-scale manufacturing mode, we'll expect to quickly begin moving down the CapEx curve and really begin to differentiate NET Power's affordability from other forms of reliable, clean generation. On the topic of reliable generation, one fairly nascent segment that has gotten the market attention lately is data centers and hyperscale data centers, in particular, given the robust load projections for AI.

These data centers are hungry for power. They're expected to become one of the largest segments for load growth in the US through 2030 and beyond and because our NET Power Plants are designed to deliver low cost, low carbon intensity, 24/7, reliable power, we think our product will be the best fit amongst options for this category.

Similar to how we assess all market opportunities, it begins with mapping out where these plants make good sense. The mapping criteria for these bright spots are unique. The mapping layers are existing and planned fiber, geology for sequestration, ambient temperatures to ensure efficient data center cooling needs, and access to natural gas. One of the criteria that's nice to have but not a need to have is proximity to power transmission lines. Given the 24/7 dispatch ability we're designing for our plants, we expect we can go off grid and put these data centers where they're best suited.

This layered map creates quite a number of interesting bright spots across North America for future NET Power plants for the segment. Interestingly, no modifications would be required for our plants. The initial size we're bringing to market with generation one will be targeting roughly 250 megawatts.

So we can see perfect pairing of NET Power plants with a single hyperscale data center. And as you see these data centers becoming larger up to 750 to 1,000 megawatts, it really lends itself to NET Power's modular design in order to deploy fleets of three to four NET Power plants to match each data center [explode].

The reason why I mentioned this market is it really reinforces the importance of our three pillar strategy. First prove this technology utility scale. We think the world needs NET Power like no other technology and the sooner we can prove it, the sooner the world can begin implementing a better pathway to energize and decarbonize.

Second, build the supply chain to quickly scale deployments in manufacturing mode. Because we have such an enviable patent portfolio around our process, it's really only NET Power that can generate low-cost, clean power for the variety of applications we're pursuing, which means we need to be prepared to deploy our plants at meaningful scale to meet the needs of not just the data center industry but utilities to meet the baseload and load following needs of grid today. And as Brian will touch on in a bit, we're ensuring the partners we pick today have the ability to scale with future demand.

And the third pillar is to build the backlog of projects to fully activate the supply chain strategy. And we're going to use our origination strategy to catalyze early adopters of NET Power plants, bringing strategic partners to these projects to accelerate their learning in order to accelerate their own license deployments across their targeted operating areas.

On this last point, we're making good progress on our first originated project OP-1 and are actively working on several others, all while advancing discussions with prospective customers across Canada, the US, the Middle East, Australia, and Europe for deployments beyond serial number one. Recapping the past year for a minute, '23 was a pivotal one for NET Power. We raised significant capital through our public listing, which will allow us to develop and prove our technology at utility scale. We commenced the feed program for our first utility scale plant, which will be located on Oxy Houston site in West Texas.

We added Lummus Technology to fulfill over recuperative heat exchanger supply chain strategy. And we announced development on our first originated project, which relocated in the [MISA] region. All of these accomplishments are stepping stones towards deploying NET Power plants at mass scale by next decade.

In 2024, we have a few key milestones to highlight. First and foremost, we plan to begin the first of four phases of combustor in turboexpander equipment validation at La Porte. In a few moments, Brian will provide additional color on these testing campaigns and why they're still important to validating the equipment and expected performance of SN-1 at project premium.

Second, we expect to complete FEED of Project Permian and we'll begin to form the project strategic on the group. As a reminder, NET Power considered various federal programs to supplement the funding for us and one, including the DOE grant program. DOE announced the recipients of the grant in December, which didn't include Project Permian.

It's important to note that the goal of Project Permian is to deploy our technology utility scale with safe, reliable operations. And the DOE grant would have required clastic sequestration, which due to the specific geology in West Texas had uptake risk and materially increases sequestration cuts to the project. When we first announced Project Permian in 2022, our plan was for NET Power and the strategic owner group to fund our first projects. This remains the plan and we expect to announce more details regarding the funding strategy later this year.

Our third 2024 expected milestone is to finalize and announce our long-term strategic partner for the air separation unit or ASU, one of the critical components of our cycle. And finally, we'll continue to advance additional NET Power origination projects. This includes submitting our application for interconnect and Class 6 wells at OP-1 and moving a couple of other origination projects along in order to talk about those locations more publicly.

So as we wrap up our first calendar year as a public company, our thesis for NET Power is playing out faster than expected. The world needs clean, affordable, and reliable power and in my mind, NET Power is the only solution that adequately checks each of those boxes. Because of the patent portfolio around the cycle, we're the only ones who can do it and so we've got to do it right, and we've got to be ready to do it at scale. I couldn't be more excited for what's to come as we continue to develop and deploy technology the world desperately needs.

So with that, I'll hand it over to Brian for operational update.

Thanks, Danny. The team continues to make steady progress developing Project Permian and our NET Power Technology. On slide 8, we highlight several key milestones completed in the last few months as well as milestones we plan to achieve in 2024. For Project Permian in the fourth quarter of 2023, we signed our limited notice to proceed or LNTP with Baker Hughes for the release of long lead material for the utility scale turboexpander.

Issuing LNTP for the primary turbomachinery of a power project is one of the key critical paths of the overall project schedule, and it allows Baker Hughes to release orders to its major material sub-suppliers in support of our schedule. More recently, we initiated engineering work with our selected ASU provider and executed our land lease agreement with Oxy for our plant site in West Texas.

These achievements allow us to remain on schedule for the project with initial power generation expected to occur in the second half of '27 to the first half of 2028. As Danny mentioned, this year, we expect to complete Project Permian FEED in the form the project consortium. This year, we will also negotiate key supply and offtake contracts and solidify our financing strategy with our strategic partners and owners.

It's important to note that NET Power's capital will be the first dollars into the project, ensuring long leads are secured at the appropriate time to maintain schedule ahead of additional capital commitments by our consortium partners. We will order additional long-lead components, including the recruitment of heat exchanger and major electrical equipment throughout 2024.

As it relates to technology development, in the fourth quarter, we signed our strategic supplier agreement with Lummus Technology, which designates Lummus as lever cooperative heat exchanger supplier for NET Power utility scale plants. I will touch more on this agreement and have significant implications for NET Power in a few slides.

This year, we will develop our initial standard plant process design package, a key licensing deliverable that supports future project feed in a manner that maximizes standardization and drives down plant capital cost. We also intend to secure a long-term strategic supplier agreement with our identified ASU provider, which we view as one of the most important next steps in standing up our long-term supply pain for the major license components of our cycle.

On slide 9, the validation campaign (technical difficulty) testing from 2018 to 2022 was primarily focused on proving our proprietary oxy combustion supercritical CO2 cycle. This upcoming testing will primarily focus on validating and derisking the Baker Hughes utility scale turboexpander and how to optimize its operation within our cycle. The ultimate purpose of the demonstration plant and demonstrator campaign is to simulate the nearest conditions possible that the utility scale turboexpander we'll see it Project Permian.

Therefore, the demonstrator turboexpander design architecture, technology, and material selections all seek to replicate as closely as possible the behavior and environment of the utility-scale turboexpander. Equipment validation will follow four primary phases, and we'll continue through 2026.

The first phase of testing at report focuses on the turboexpanders burner, which is where combustion of natural gas and oxygen take place in a CO2 environment. We will test multiple oxy-fuel burner configurations and Baker will select the best burner heading into the next phase.

The second phase of testing will take the down-selected oxy-fuel burner from Phase 1 and tested alongside with the combustor liner and other hardware to form a single demonstrator size combustor can. The combustor can's purpose is to deliver the high pressure and high temperature mixture of CO2 and water to power the expander. This testing will allow us to optimize the combustion and full report demonstration conditions.

The third phase of testing will involve scaling the demonstrator size combustor can from Phase 2 to a utility scale can with clusters of burners and then testing it with a goal of learning and to optimize the design of the utility-scale combustor that operated Project Permian. The fourth and final phase will test the full demonstrator turboexpander, including the validation of materials and design architecture used on the turboexpander for Project Permian. Baker Hughes and that power will use this testing to tune our analytic and performance simulation models with the acquired test data.

We will confirm the demonstrator turboexpander and overall cycle operability and dynamic capability. All of this will allow us to confirm the overall demonstration plant cycle design and plant control system integrated with the Baker Hughes equipment, ensuring that we can minimize residual first-of-a-kind risk prior to the Project Permian initial operations.

Turning to slide 10, our strategic supplier agreements signed with Lummus marks a significant achievement for the continued development of the NET Power cycle. As I mentioned before, Lummus is the designated recuperated heat exchanger supplier for NET Power. Not only do they have an extensive track record of delivering heat exchangers globally, but their 110 plus years of experience in licensing technologies for numerous process industries makes them the ideal partner for NET Power.

Lummus has a long history of supporting NET Power technology with an unmatched understanding of the NET Power heat exchanger requirements. As a system integrator, Lummus will leverage its best-in-class global supply chain of heat exchanger component manufacturers to design and manufacture the most optimal performing and lowest total cost recuperative heat exchanger network for our cycle. They will also be proactively ramping up their capacity to meet future demands for their power plants.

This partnership further expands our competitive and IP modes. NET Power will own all cycle, process, and controls IP developed and (technical difficulty) can only sell this proprietary recuperated heat exchanger to NET Power licensees. NET Power will also benefit from receiving licensing revenue on Lummus's future sales into NET Power plants, as is customary for specialty licensed equipment in the process industry. This agreement is a fantastic partnership for us, and we're excited to work with Leon and his team at Lummus.

Slide 11 provides an all-encompassing view of our strategic supply chain partnerships that have been formed for the main components of our cycle. As previously mentioned, we have initiated engineering work with our selected air separation unit provider for Project Permian, who will look to form a long-term strategic supplier partnership with them this year and announce more details at that time.

Another area of focus this year will be establishing our control systems partner. As we evaluate each supplier partnership, we look for win-win opportunities to leverage our partners' most advanced technologies and to further enhance our competitive position and IP mode. So far, we have been able to find best-in-class partners that are aligned with our vision for delivering clean, affordable, and reliable energy, and importantly, to do so at manufacturing scale.

With that, I'll pass it off to Akash for the financial update.

Thanks, Brian's. Turning to slide 13. Net power ended the fourth quarter of 2023 with a strong balance sheet, including approximately $637 million of cash and short-term investments. For the quarter, our total capital expenditures were approximately $8 million, comprised of approximately $5 million capitalized costs associated with the ongoing Project Permian development activities and approximately $3 million spent at report on modifications and upgrades ahead of testing, which is expected to begin this year.

Under the current interest rate environment, we continue to benefit from putting our balance sheet cash to work to materially offset our corporate spend. In the fourth quarter, our cash flow used in operations was approximately $3 million. As mentioned last quarter, we expect cash flow use in operations to continue increasing as we build out our organization, progressive joint development program with Baker Hughes, and ramp up activity on La Porte.

Moving to the right side of slide 13, we show an illustrative use of existing capital through the end of 2027 when we expect initial power generation for our first utility-scale projects. Of the approximately $637 million on balance sheet, we expect [your marketing] approximately $200 million for our equity contribution to Project Permian, approximately $175 million for the CapEx and OpEx outlook quarter, as well as the Baker Hughes joint development agreement, and approximately $265 million towards corporate G&A origination work and other expenditures.

NET Power's fully diluted share count was approximately $247 million shares as of December 31, 2023. This was comprised of approximately 212 million Class A. and Class B vested shares currently outstanding, 19.5 million shares issuable upon the exercise of outstanding public and private warrants, which were given apparent additional $225 million in cash, 1.6 million shares subject to earnouts or vesting requirements, and approximately 14 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 Note 10 and 11 of our 10-K.

That concludes our prepared remarks. I'll now pass it back to the operator to open up the line for Q&A.

(Operator Instructions) Noel Parks, Tuohy Brothers.

Hi, good morning. I just had a (multiple speakers) a couple of [lines] to right run by you. When you were talking about different phases of testing, I think in the fourth one, there was a mention of the -- with the turboexpander that you'll use that process to confirm your analytics that you and Baker Hughes will be using. Just wondering when you talk about analytics for that, that does stage of evaluation, are those proprietary metrics you are going to have to build or are they just more sort of standardized benchmarks you'll be using?

Yes, no, this is Danny. So the question is really around the configuration and the design of the components. Is that right?

Yes, yes.

Yeah. No, these are custom-built Baker component. But I'm going to turn it over to Brian to give you some of the technical details of the components.

Sure. Yeah, thanks, Danny. Yeah, no. So the analytical tools definitely are proprietary to ourselves in the cycle design and to Baker and their various toolsets on how they design compressors, expanders, turbines, et cetera. So with any model or any simulation, you're making some assumptions. So just as a typical engineering good practice, as you get data, you always go back to your analytics and simulations, and verify them or update them.

Great. Thanks for the clarification. And as you -- you've talked a good bit about (technical difficulty) securing the supply chain and I was also thinking about with the Lummus relationship, I wouldn't expect you necessarily to get into details, but does Lummus have incentives for adhering to your schedule or timetable? I'm just curious if you could just generally characterize what those would be like, just to [see] your ability to manage that?

Sure. Yeah, I can take that, Danny. Yes, they absolutely do. I mean, the strategic supply agreement really aligns our incentives together. There's an incentive for them to pursue a cost-down reduction program with us. There's incentives to build out the capacity required to ramp up into manufacturing mode.

There's incentives to standardize. So it really aligns with our three pillars, which any supply agreement. That's really what we're trying to do -- is not optimize just for one order, Project Permian, but to build out really alignment through all three pillars with these partners.

Great. Just what I was wondering. Thanks.

Thomas Meric, Janney Montgomery Scott.

Good morning, everyone. Dan, you mentioned the power plants as an option for data center power, and I'm curious about unpacking that a little bit more. Mainly just curious on how you think -- or how we should think about the challenges and opportunities for this kind of power offtake, specifically with respect to CO2 infrastructure build-out, and the sequestration opportunities?

Yes. No, certainly. I mean, like I mentioned in the prepared remarks, I mean, putting these plants in the right location is the first piece. And so, again, it starts with the geology. It starts with mapping it out. I think come in when most people think of data centers and hyperscale data centers, they only really think of data center alley in Virginia just because that's where the largest concentration is.

But if you look at just across the United States broadly, I mean data centers everywhere. There's more data centers, I think, in Texas at this point in there on that West Virginia, [DC] metroplex area. And the reason for that is that's where population trends are going. That's where data demand for AI and [protons] are going from.

And so when you actually start to map all this stuff out and you map out where is their data center demand for future deployments and whether it's natural gas infrastructure on getting access to that gas and you map out just the subsurface piece, it really starts to eliminate them some really interesting areas that they think. Most people aren't totally appreciative -- like the northern MISA region from Illinois, Indiana, Ohio, and Kentucky at West Virginia. Why couldn't West Virginia become data center alley version 2.0 with even lower cost natural gas and lower cost power?

That's lower carbon intensity than what's in Virginia right now. If you could put in NET Power there. So these are all like sort of like paradigm-shifting opportunities where it really opens up the landscape, where you can start to establish even lower carbon intensity, lower costing power for these data centers. And it just so happens that the design that the team wanted to bring to market in terms of the size of this NET Power plant, the first utility scale one, really correlates fairly well with the power load for these data centers.

So we think it's going to be a really good match made in heaven. Conversations with a lot of the big tech guys that have been going on over the course of the last few years in early stages. But I think just like why we thought it was so important to putting NET Power in the public spotlight for the utility potential customers, it's to ensure that they understand this pathway that NET Power creates before they commit to a much higher cost, much less reliable option.

And so we're designing this plant for reliability. We're designing this plant for affordability and inherent to that cycle is 100% -- almost 100% capture of that CO2. So we think from just a responsibility and sustainability perspective and NET Power is going to -- we think we are the top choice for a lot of this potential applications.

Thanks. That's super helpful. Brian, on the strategic partners, you went into good detail on Lummus and the heat exchanger, so I won't ask for any more from that. But how do you think about that in terms of a control system partner? And just what should I or investors look for the next couple of quarters?

Sure. Well, on that when it's not -- it is really critical, but it's not a long lead at similar to, let's say, the heat exchanger or turbomachinery. So we have a little time to get this right. But what we'll look for is, again, a partner aligned with our three pillar strategy. And if you think about the NET Power process, what we're really doing is bringing together best-in-class combination of equipment that all have to work together in unison.

So really the control system are called the code on how you operate this plant is really some of our key technology development and IP, and we develop that in La Porte, but it will be modified and enhanced as we go to Project Permian. So we'll be looking for a partner similar to the others that we can have repeatable scale with, that respects our IP, that wants to grow with us, and we'll focus on cost reduction programs. All the key elements that we want to embed in the other partnerships.

Perfect. That's it for me. Thank you.

Wade Suki, Capital One.

Good morning, everyone. Thanks for taking my question. Just wondering if you might be able to give us a little more detail or color to the extent you feel comfortable on the commercial pipeline, geography -- I hate to put you to geographies -- or type of customers? Any additional color would be great, if you don't mind.

Yes, Wade, I think as we kind of said in the opening remarks, the primary application for NET Power is power to the grid, CO2 gets permanently sequestered in the geology. And that right now is the biggest market for us. And a lot of it happened to be in a lot of -- just the regulated power markets, [MISO], PJM, Ercot, [Kaito], Alberta, the Middle East.

And so that's obviously the primary market that we're really where we're focusing a lot of the origination efforts. That's where we're starting to see just a lot of inbounds. And I think that's really just because that's where the geology is very conducive to sequestering the CO2 where it's been proven.

I mean that sequestration [piece] is not just the entirety of the environmental proposition of NET Power plant put in places like the US where you get that 45Q. It's a huge, huge part of the economic proposition to -- and in some of those places, you can actually make more money on sequestering the CO2 than you do on generating 24/7 clean power. So those conversations continue to pick up.

I would say like the one thing that has been surprising is, I think, on a lot of countries, a lot of companies have come out and commit to these net zero ambitions without really doing a calculus to figure out what is that pathway to actually get there. And so we're starting to have more and more conversations with potential customers who are coming to us saying, all right, we've done the math and it just doesn't pencil out trying to get there with just renewables alone. It doesn't pencil out with some of these other options without causing a doubling or tripling of the power prices that I would have to charge my customer, and that's just not tenable.

And so now people are saying, how soon can you guys can be able to scale up into manufacturing mode? So it's really good feedback that we're getting from the market. It's part of like the whole thesis of us taking NET Power public in the first place, was eventually the market's going to come to this realization that there's no solutions out there that can ensure affordable, reliable, clean power at the scale that the world needs.

And unfortunately, I think the world's already committed to this lower carbon future without really having those solutions in hand to get them there in that pathway. And so NET Power is creating that pathway. And so I think as we think about how can we help our potential future customers, a lot of what Project Permian allows us to do is start to bring strategic partners into Project Permian to get their feet wet, to get them up that learning curve on the NET Power plant. So that they're comfortable to deploy it across their primary geographic territories.

Same way with the origination strategy. The origination strategy [for us] isn't because we wanted to become an independent power producer. We want to be able to create a pathway to bring in prospective future customers participate to operate and really learn the NET Power plants so they're super, super comfortable deploying across their primary areas also.

So as we really think about our commercial strategy, it's about creating pathways to global license deployments in the 2030s and beyond. And so we're starting to have conversations with those customers that are interested in licenses, that are really interested in being able to come into our early projects to really dip their toe in the water and really understand how to run these plants.

So the origination piece is just going to be a catalyst to those long term license opportunities. And so we're seeing it both in the US. We're seeing it across the world and I think with things like data centers, you're starting to see entirely new markets pop up (technical difficulty) load for power demand, both here in the United States and other parts of the world.

Well, fantastic. Thank you. Not to put you on the spot here, but would your expectation be that, within a couple of years of Project Permian coming online, we might have SN-2 or OP-2 coming online shortly thereafter or somewhere in that timeline? Is that a fair way to think about it?

Yes, that's right. I think the way we're looking at all of these origination projects -- because we do have the benefit of time -- because the first time we'll be coming online mid '27, end of '27, beginning of '28, that range there. We're really figuring out now where do we want SN-2 to be, the second utility scale plants. So with OP-1, that project that we announced, we'll be in the MISA regions. We're going to be filing our interconnect application there.

I think that MISA window opens on next week and will be open for 30 days. And so we'll get our interconnect application in there during that window. We're working on our Class 6 permits with our partner up there. And so we're going to be in a place where we're going to have all permits in hand to do power to the grid sequestration into the ground well in advance of that plant. If we said we wanted to be SN-2, it's going to be in a position to be SN-2. I think the determination of if it is SN-2, or if it's SN-3, or SN-4 is really a function of other really economic more strategic projects that could leapfrog and become SN-2.

So what are you really going to be seeing from us doing over the next few years with origination, but also with license opportunities is just continuing to build up the backlog of projects and we'll be able to slot them according to their importance as to the NET Power strategy into the long-term proposition for the shareholders.

Fantastic. Thank you so much. Appreciate it.

Thanks, Wade.

Betty Jiang, Barclays.

Good morning. I have a question for Brian. Just wondering if you could provide a bit more color around how you think about the risk profile for each of the validation phases La Porte on slide 9? Just trying to understand basically is Phase 1 and 2 just testing the equipment designed by Baker? And what are the most important pieces that needs to get derisked? And then also once you've proven the operations at the demonstration scale, is relatively less risky to scale it up to utility scale? Thanks.

Thanks for the question. So the phases are sequenced in order with each phase of testing validating and retiring key technical risks, which are shown on the slide. So in this way, there's no specific tests that -- let's say that's the highest risk, but they're building upon each other.

So they're all important, I guess, to say that -- a reminder that we're developing the utility scale for Bakers, developing utility scale, turboexpander in parallel. So really this is about validation. Yeah, and both happening completely in parallel.

I don't know if I answered your question fully, but I would say that the all the phases are important. They all build on each other. Each one retire certain risks or certain results that Baker is looking to see. It's each one builds an order from there.

Got it. So the demonstration equipment is actually what's currently on the plant right now.

So the plant was built, it exists, it's there. We are making modifications to it that are specific to the Baker Hughes turboexpander and the testing for the combustors. So Baker's equipment will be shipping in this year and over the future years. Basically be placed where the prior turboexpander was located.

Got it. When will the Baker's turboexpander be arriving on-site and when will it get connected to the plant?

Yeah, that will be in the 2026 timeframe. So between now and then we're doing the combustor testing, which is a major component of the turboexpander. Again, what we're doing is really -- yeah, we're demonstrating the combustion system, both on the demonstrate sites which happens in Phase 2, and the utility scale combustor side. So in essence, before we start Project Permian, we will have already operated full utility size can at La Porte.

Got it. Understood. And a follow up on the licensing fee, just on the licensing fee that's related to [Luminous], is it incremental to the fees that you have originally laid out for the NET Power Cycle technology? And if so, just how material is it relatively?

Yes, I can take that, Danny. This is Akash. Yeah, it is additive. But as we said before, we're going to go through a pricing for each license we sell. It's going to be a part of getting the (inaudible) plant economics, right? You see a plant that is turning 20%-plus returns, once you come down the CapEx curve, we should be charging more for a license.

So it really is the license fee for operating -- constructing and operating a NET Power plant will be done on an individual project by project basis. And as far as the Lummus and any other equipment licensing fees, it's too early for us to go out and say what that number is going to be, but it is a fraction, I say, of like our plant license is and it's really formulaic to incentivize them to come down cost curve and share in the benefit of that. So it's a little too early for us to say what that number is given we haven't placed an order yet for a third party heat exchangers. But there is a formulaic way of us approaching what that equipment licensing fee will be.

Got it. No, that's clear. Thanks for the color. Thank you.

Thank you. At this time we've reached the end of our question-and-answer session, and I'll turn the floor back to Daniel Rice for closing remarks.

Thanks, everybody for joining us today. Really excited to share this update with you, share the key 2024 milestones. Really in the foreground for the next few years, we're really focused on steady progress through COG on serial number one, which continues on schedule.

And really, as we talked about in the prepared remarks and some of the Q&A, in the background, we're seeing significant step changes in market sentiment and total addressable market that really set us up for long-term success. So it's critically important we do it right with serial number one and doing so really unlocks what we think is going to be one of the largest, most valuable total addressable markets. So really any company in the world today.

So huge expectations for us, and this team is up to the challenge, and we are deeply appreciative of your support on this mission to deliver the energy trifecta. Have a good day.

Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.