Net Power Inc.

03/09/2026 | Press release | Distributed by Public on 03/09/2026 14:28

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following management's discussion and analysis ("MD&A") provides information that management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition and includes forward-looking statements that involve risks, uncertainties and assumptions. This section should be read in conjunction with Part I of this Annual Report on Form 10-K, the consolidated financial statements and related notes included in Part II Item 8 in this Annual Report on Form 10-K and the section titled "Cautionary Note Regarding Forward-Looking Statements" included in the forepart in this Annual Report on Form 10-K.
Unless the context otherwise requires, all references in this section to "Net Power," "we," "us," or "our" and the "Company" refer to the business of Net Power Inc. and its subsidiaries. Additional terms used herein are defined in the section entitled "Certain Defined Terms" and elsewhere in this Report.
Overview
We are an energy technology and project development company focused on delivering low-carbon gas power solutions. Historically, our sole business has been the development of a novel oxy-combustion power generation system designed to produce reliable and affordable electricity from natural gas while capturing virtually all atmospheric emissions (the "Oxy-Combustion Cycle"). Recently, we have broadened the scope of our business to include the generation of power using natural gas turbines paired with PCC technology that we intend to license from Entropy.
Key Factors Affecting Our Prospects and Future Results
We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including, but not limited to, our ability to license PCC technology from Entropy, potential supply chain issues, changes in tax policies and other incentives supporting carbon capture, our access to the capital needed to finance the development of our projects, and development of competing energy technologies sooner or at a lesser cost than our products. Supply chain issues related to the manufacturing and transportation of key equipment, including as a result of tariffs imposed by the U.S. or other countries or other trade barriers, measures, or conflicts, may lead to a delay in our commercialization efforts, which could impact our results of operations, financial condition and prospects. Also, currency fluctuations, inflation, and tariffs and other trade barriers, measures or conflicts may significantly increase freight charges, raw material costs and other expenses associated with our business, and such increased costs could materially and adversely affect our results of operations, financial condition and prospects.
Commencing Commercial Operations
Net Power is progressing its first clean firm power hub at the Project Permian site in West Texas. The project is being sized to accommodate up to one gigawatt of clean firm power generation capacity. We intend for Phase I of the project to utilize readily available gas turbines paired with Entropy's PCC technology. On November 12, 2025, we entered into an agreement to purchase two modular gas turbine generator sets with nominal gross power of approximately 30 megawatts each for use at Project Permian. Final investment decision ("FID") for Phase I is expected in the third quarter of 2026 with targeted commercial operations by early 2029, which would make it the first commercial clean gas power project in the United States.
Key Components of Results of Operations
We are a development stage company and our historical results may not be indicative of our future results, particularly considering the recent shift in the anticipated timing of our technology development of the Oxy-Combustion Cycle and the introduction of the Clean Gas Product. Accordingly, the drivers of our future financial results, as well as the components of such results, may not be comparable to our historical or future results of operations.
Results of Operations
Comparison of the Year Ended December 31, 2025 to the Year Ended December 31, 2024
The following table sets forth our consolidated results of operations data for the periods presented:
Year Ended December 31,
$ in thousands 2025 2024 $ Change % Change
Revenue $ - $ 250 (250) (100) %
Cost of revenue - 31 (31) (100) %
Gross profit - 219
Operating expenses
General and administrative 40,345 30,267 10,078 33 %
Sales and marketing 4,912 3,865 1,047 27 %
Research and development 99,508 63,853 35,655 56 %
Project development 72,379 1,932 70,447 3,646 %
Impairment and other charges 1,512,217 - 1,512,217 n/a
Depreciation, amortization, and accretion 62,387 81,623 (19,236) (24) %
Total operating expenses 1,791,748 181,540
Operating loss (1,791,748) (181,321)
Other income
Interest income 20,297 31,389 (11,092) (35) %
Change in Earnout Shares liability and Warrant liability 72,391 (25,656) 98,047 (382) %
Change in Tax Receivable Agreement liability 21,317 - 21,317 n/a
Other income 11 364 (353) (97) %
Net other income 114,016 6,097
Net loss before income tax (1,677,732) (175,224)
Income tax benefit 4,305 10,580 (6,275) (59) %
Net loss after income tax (1,673,427) (164,644)
Net loss attributable to non-controlling interests (1,094,799) (115,453)
Net loss attributable to Net Power Inc. $ (578,628) $ (49,191)
General and administrative
General and administrative expenses increased by $10.1 million, or 33%, for the year ended December 31, 2025, as compared to amounts for the year ended December 31, 2024. During the second quarter of 2025, we terminated the employment of our former Chief Operating Officer, our former Chief Financial Officer, our former Chief Accounting Officer, and certain other employees. Such terminations resulted in $3.1 million in severance payments to these employees, as well as $1.1 million of stock-based compensation for related vesting accelerations. There also was an overall increase of $2.8 million in compensation expense due to growth in employee headcount and stock-based compensation awards granted during 2025. Additionally, we incurred a $3.0 million increase in professional fees, primarily for engineering, tax, and legal services.
Sales and marketing
Sales and marketing expenses consist primarily of personnel-related costs and consultants costs directly associated with our sales and marketing activities, which include general publicity efforts for the Company. Sales and marketing expenses increased by $1.0 million, or 27%, forthe year ended December 31, 2025, as compared to the year ended December 31, 2024. This increase was primarily attributable to higher employee
headcount as well as severance costs and related accelerated stock-based compensation, partially offset by lower professional fees.
Research and development
R&D expenses consist primarily of labor expenses and fees paid to third parties working on and testing specific aspects of the Oxy-Combustion Cycletechnology, including testing at our La Porte Demonstration Facilityand development activities under the BHES JDA. R&D expenses increased by $35.7 million, or 56%, for the year ended December 31, 2025, as compared to the year ended December 31, 2024. This increase was primarily due to $27.9 million associated with development activities under the BHES JDA which includes $7.4 million for the BHES JDA Make-Whole Payments.During the fourth quarter of 2025, the Company reversed $3.3 million in previously recognized share-based compensation expense subsequent to the Business Combination related to the BHES Bonus Shares as the milestone targets were no longer probable. The Company also recorded $1.3 million in accelerated share-based compensation expense related to shares issued in connection with signing of the BHES JDA. Additionally, plant and utility expenses increased $6.2 million due to the validation testing campaigns at the La Porte Demonstration Facilitythat began in the fourth quarter of 2024 and was suspended during the fourth quarter of 2025. The Company also incurred higher engineering consulting fees of $2.0 million and $1.5 million in costs related to expansion of its engineering headcount to support the Oxy-Combustion Cycletechnology development efforts.
Project development
Project development expenses consist of labor expenses and fees paid to third parties developing commercial scale projects. Project development expenses increased by $70.4 million, or 3,646%, for the year ended December 31, 2025, as compared the year ended December 31, 2024. In March 2025, the Company suspended further long-lead equipment releases for the Oxy-Combustion Cycletechnology project. Accordingly, the Company began expensing costs associated with the project as management assessed the Oxy-Combustion Cycletechnology project's feasibility throughout 2025. These costs were capitalized during the year ended December 31, 2024. For the year ended December 31, 2025, the Company incurred $24.8 million of costs related to Project Permian Oxy-Combustion Cycle technology project. Additionally, in the second quarter of 2025, the Company incurred $19.5 million in milestones payments for the purchase of long lead materials with BHES under the Letter of Limited Notice to Proceed ("BHES LNTP"). In the fourth quarter of 2025, the Company notified Baker Hughes of its intent to terminate the BHES LNTP in connection with the Company's suspension of the Amended and Restated JDA, which resulted in $26.1 million of contract termination fees recognized in 2025.
Impairment and other charges
During the first quarter of2025, the Company assessed its goodwill for impairment due to a change in the Company's business plan and related sustained decrease in the Company's market capitalization. As a result, the Company fully impaired goodwill for an impairment loss of $359.8 million. Also in the first quarter of 2025, the Company expensed $56.1 million of costs associated with the construction of SN1 as management initiated a value engineering process to assess the project's feasibility and optimize its design and temporarily paused further long lead equipment releases. In the third quarter of 2025, the Company recognized an impairment loss of $1,095.8 million related to its long-lived assets as a result of the responsiveness from potential customers to the Company's technology and integrated product offering, the estimated cost reductions achieved in Project Permian, and the resulting revisions to the Company's forecasted future unit deployments and related cash flows based upon the perceived marketability and commercial viability of the Company's technology.
Depreciation, amortization, and accretion
Our depreciation, amortization, and accretion expenses consist primarily of depreciation on our La Porte Demonstration Facility and amortization of intangible assets. Depreciation, amortization, and accretion expense decreased by $19.2 million, or 24%, for the year ended December 31, 2025, as compared to amounts for the
same period in 2024, primarily due to lower depreciation and amortization rates as a result of the long-lived asset impairment during the third quarter of 2025.
Interest income
Interest income decreased by $11.1 million, or 35%, for the year ended December 31, 2025, as compared to amounts for the same period in 2024. This decrease was due to lower interest-bearing cash and investment balances, declines in interest rates, and lower investment accretion.
Change in Earnout Shares liability and Warrant liability
The Change in Earnout Shares liability andWarrant liability relates to movements in fair value of earnout shares and warrants which have been classified as liability instruments. The changes are primarily due to fluctuations in the market price of our Class A Common Stock and related volatility.
Change in Tax Receivable Agreement liability
In March 2025, the Company reduced the Tax Receivable Agreement ("TRA") liability of $21.3 million to zero as payments related to the TRA were not considered probable. In May 2025, pursuant to its rights under the TRA, the Company delivered to the agent of the TRA holders notice of the Company's intent to terminate the TRA (the "Early Termination Notice"). No early termination payment was payable to any TRA holder. The Early Termination Notice became final and binding on June 12, 2025.
Income tax benefit
Our income tax benefit decreased by $6.3 million for the year ended December 31, 2025, as compared to amounts for the year ended December 31, 2024. This change was due to an increase in the Company's valuation allowance, partially offset by a favorable permanent difference related to the change in the value of the Warrant liability as compared to the same period in 2024.
Net loss attributable to non-controlling interests
Net loss attributable to non-controlling interest was 64.0% of net loss before income tax for the year ended December 31, 2025, as compared to 64.4%of net loss for the year ended December 31, 2024. The change in the non-controlling interests was due to exchanges by OpCo members of Class A OpCo units for Class A PubCo shares, partially offset by the additional issuance of Class A OpCo units under the BHES JDA.
Liquidity and Capital Resources
Our principal sources of liquidity are cash, short-term investments, and investments in highly liquid available-for-sale securities. Historically, our sources of liquidity have also included raising additional capital through the sale of ownership interests. We may issue additional equity securities in the future. We measure liquidity in terms of our ability to fund the cash requirements of our R&D activities, project development, and our near-term business operations, including our contractual obligations and other commitments. Our current liquidity needs primarily involve general and administrative costs and costs to develop our projects and procure the equipment necessary for such projects.
The following table summarizes our liquidity position as of the dates indicated:
December 31,
$ in thousands 2025 2024
Cash and cash equivalents $ 199,430 $ 329,230
Short-term investments - 100,000
Available-for-sale investments1
176,704 100,972
Total liquidity $ 376,134 $ 530,202
___________
(1) $38.2 millionof these investments are classified as long-term on our consolidated balance sheet.
The short-term investments werecomprised of a single 12-month certificate of deposit, held with a domestic banking institution, which matured in June 2025. Additionally, our current liabilities were $47.5 million and $17.9 million at December 31, 2025and December 31, 2024, respectively. The decrease in our liquidity position is primarily a result of cash used for the development of the Oxy-Combustion Cycleunder the BHES JDA, payments related to long-lead equipment and engineering for SN1, testing campaigns and capital expenditures at the La Porte Demonstration Facility, and general corporate expenses.
We believe we have the ability to manage our operating costs such that our existing liquidity will be sufficient to fund our obligations for the next 12 months following the filing of this Annual Report on Form 10-K. We believe that our current sources of liquidity on hand should be sufficient to fund our general corporate operating expenses as we work to develop our products and projects, but certain costs are not reasonably estimable at this time and we may require additional funding. Specifically, we may require additional funding in order to successfully fund the projects we intend to develop.
Cash Flow Summary
The following table shows our cash flows from operating activities, investing activities and financing activities for the presented periods:
Year Ended December 31,
$ in thousands 2025 2024
Net cash used in operating activities $ (120,784) $ (31,649)
Net cash used in investing activities $ (8,805) $ (168,673)
Net cash used in financing activities $ (230) $ (4,929)
Operating Activities
Cash used in operating activities increased by $89.1 million for the year ended December 31, 2025 compared to the year ended December 31, 2024. Our net cash used in operating activities to date have been primarily comprisedof payroll, material and supplies, facilities expense, and professional services related to R&D, including the BHES JDA, and general and administrative activities. This change was primarily due to higher project development costs, R&D costs, including costs incurred under the BHES JDA and validation testing campaigns at our La Porte Demonstration Facility, and the expansion of the Company's corporate infrastructure throughout 2024 and into 2025. We expect our cash used in operating activities to increase significantly before we start to generate any material cash inflows from our operations.
Investing Activities
During the year ended December 31, 2025, net cash used in investing activitiesincreased by $159.9 million compared to the year ended December 31, 2024. Our cash used in investing activities for the year ended December 31, 2025 primarily reflects the maturity of the Company's certificate of deposit and the reinvestment of those funds into available-for-sale securities, along with capital expenditures related to the La Porte Demonstration Facility and SN1 during the period in which costs were capitalized. Cash used in investing
activities for the year ended December 31, 2024primarily reflects the initial investments in available-for-sale securities as well as capital expenditures related to Project Permian and the La Porte Demonstration Facilityduring that period.
Financing Activities
Our cash from financing activities decreased by $5 million for the year ended December 31, 2025 compared to the year ended December 31, 2024. Cash used in financing activities for the year ended December 31, 2024consists of finance lease obligation payments, income tax payments on vested share-based compensation awards, and issuance of Class A Common Stock under share-based compensation plans.
Commitments and Contractual Obligations
Asset Retirement Obligation
We hold a lease for the approximately 218,900 square feet of land under the La Porte Demonstration Facility from Air Liquide at a rate of one dollar per year. In addition, we have an oxygen supply agreement with the lessor to supply oxygen to the La Porte Demonstration Facility. The lease expires on the earlier of (i) January 1, 2031 and (ii) the termination of our oxygen supply agreement with the lessor. The term of the oxygen supply agreement expires on January 1, 2030 with automatic 12-month renewal terms. The oxygen supply agreement may be terminated by us or by the lessor upon 24 months' written notice prior to the expiration date of its current term. The underlying lease requires the removal of all equipment and the obligation to restore the land to post-clearing grade level, which has resulted in the recognition of an asset retirement obligation liability of $3.6 million and $3.3 million as of December 31, 2025 and 2024, respectively.
Leases
The Company leases corporate office space in Durham, North Carolina, and Houston, Texas. The Company also leases land in West Texas for Project Permian from a subsidiary of Occidental Petroleum. Additionally, the Company leases two office trailers at the La Porte Demonstration Facility, as well as a warehouse, in La Porte, Texas.
As of December 31, 2025, future minimum lease payments attributable to our operating and finance lease arrangements are expected to equal $4.4 million and $0.1 million, respectively.
Joint Development Agreement
Under the BHES JDA, we committed to funding a portion of the remaining development costs incurred through a combination of cash and equity. The BHES JDA's total contract value was $140 million as of December 31, 2025. As of December 31, 2025, we recognized approximately $62.0 million of inception-to-date cash expenses and approximately $62.0 million of inception-to-date share-based expenses related to the BHES JDA. The share-based expense excludes $8.0 million of realized loss on share issuance. In addition, the Company may be required to make additional cash payments to BHES during periods when the volume-weighted average price of our Class A Common Stock is less than $4.00 per share in the 10 trading days preceding applicable quarterly share issuances under the terms of the BHES JDA. As of December 31, 2025, the Company had $2.8 million in current liabilities payable to related parties on the consolidated balance sheet related to the BHES JDA Make-Whole Payment. For the year ended December 31, 2025, the Company incurred expenses of $7.4 million related to the BHES JDA Make-Whole Payments.
In January 2026, we agreed to suspend the BHES JDA from an until March 31, 2026 (subject to further extension upon agreement from both parties) while Baker Hughes evaluates the proposed development and commercialization of industrial-scale plants utilizing Oxy-Combustion Cycle technology. Under the terms of the suspension, we are obligated to pay any invoiced costs incurred in the fourth quarter of 2025 and any costs resulting or arising from the suspension, up to a $3.0 million cap.
Off-Balance Sheet Arrangements
As of December 31, 2025 and 2024, we have not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Capital Commitments
As of December 31, 2025, we have committed to purchase certain components of industrial machinery for use at our La Porte Demonstration Facility and our first clean firm power hub at the Project Permian site in West Texas. The total gross commitments totaled $79.6 million. As of December 31, 2025, there was $63.6 million remaining related to these commitments.
Critical Accounting Policies and Estimates
Our financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. ("US GAAP"). Preparation of the financial statements requires our management to make a number of judgments, estimates and assumptions relating to the reported amounts of expenses, assets, and liabilities and the disclosure of contingent assets and liabilities. We consider an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates, and assumptions could have a material impact on our financial statements. Our significant accounting policies are described in Note 2 - Significant Accounting Policies in our consolidated financial statements included in Part II, Item 8 of this Annual Report.
Impairment of Long-Lived Assets
We believe evaluating the recoverability of long-lived assets is a critical accounting estimate because it requires management to make judgments and assumptions regarding future trends and events. When events or changes in circumstances indicate that the carrying amount of long-lived assets may not be recoverable, the Company prepares projections of the undiscounted future cash flows expected to be generated from the underlying asset group. If the projections indicate that the underlying asset grouping is not expected to be recoverable, the estimated fair value of the asset group is determined. An impairment loss is recognized based on the difference between the carrying value of the asset group and its estimated fair value. The loss is allocated to the long-lived assets of the group on a pro-rata basis using the relative carrying amounts of those assets. During the year ended December 31, 2025, we recognized impairment losses of $1,095.8 million related to our long-lived assets. We did not recognize any impairment losses on long-lived assets during the year ended December 31, 2024.
In January 2026, we agreed to suspend the BHES JDA until March 31, 2026 (subject to further extension upon agreement from both parties) while Baker Hughes evaluates the proposed development and commercialization of industrial-scale plants utilizing Oxy-Combustion Cycle technology. During the suspension period, the Company and Baker Hughes will engage in negotiations regarding potential amendments to the BHES JDA. The outcome of these negotiations related to the future development and commercialization of the industrial-scale Oxy-Combustion Cycle technology may adversely impact the recoverability of the carrying value of the asset group associated with the Company's Oxy-Combustion Cycle technology.
Private Placement Warrants
The fair value of the Private Placement Warrant liabilities were determined using Black-Scholes Merton Model, which has various significant unobservable inputs. We believe these valuations are critical accounting estimates because management is required to make assumptions that could have a material impact on the valuation of these liabilities, which include our best estimate of expected volatility and expected holding periods. When estimating expected volatility, management incorporates volatility of comparable public companies and the Company's own volatility. Changes in the estimated fair values of these liabilities may have material impacts on our results of operations in any given period, as any increases in these liabilities have a corresponding negative impact on our results of operations in the period in which the changes occur and vice versa. An estimate of the
sensitivity to changes in our assumptions is not practicable given the numerous assumptions that can materially affect our estimates.
Income Taxes
We believe income taxes are critical accounting estimates because significant judgment is required in assessing the recoverability of our deferred tax assets from future taxable income and the timing of reversing temporary differences. Additionally, accounting for uncertain tax positions requires management to make judgments regarding the likelihood the position will be sustained based on its technical merits.
As managing member of OpCo, Net Power Inc. consolidates the financial results of OpCo in its consolidated financial statements. OpCo represents a pass-through entity for income tax purposes. As a pass-through entity, OpCo is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by OpCo is passed through to its members, including Net Power Inc., which is taxed as a corporation that pays corporate federal, state and local taxes with respect to income allocated from OpCo. A change to future taxable income or tax planning strategies could impact our ability to utilize deferred tax assets, which would increase or decrease our income tax expense and taxes paid. An estimate of the sensitivity to changes in our assumptions is not practicable given the numerous assumptions that can materially affect our estimates.
Emerging Growth Company Accounting Election
Section 102(b)(1) of the JOBS Act exempts emerging growth companies ("EGCs") from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect not to take advantage of the extended transition period and comply with the requirements that apply to non-EGCs, and any such election to not take advantage of the extended transition period is irrevocable. We expect to be an EGC through the end of 2026, which is the last day of the fiscal year following the fifth anniversary of our initial public offering. As an EGC, we intend to take advantage of the benefits of this extended transition period.
Net Power Inc. published this content on March 09, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on March 09, 2026 at 20:28 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]