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In a significant move for its utility-scale power plant project, Net Power Inc. (NYSE:NPWR) has entered into a key agreement with Baker Hughes Energy Services LLC. The deal, announced today, involves the procurement of specialized equipment and services valued at approximately $90 million.
This transaction, which took place on September 30, 2024, is the second variation of the Letter of Limited Notice to Proceed (LNTP) for purchasing long-lead materials necessary for the construction of Net Power's inaugural utility-scale power plant. The agreement outlines the acquisition of a turboexpander and other crucial process equipment and machinery, collectively known as KPEP.
Initial payments under the original LNTP began in December 2023 and are included in the total amount of $90 million. The remaining payments are scheduled to continue through April 2026. However, Net Power Inc. and Baker Hughes plan to replace the LNTP with a definitive purchase agreement for the turboexpander and KPEP, expected to be signed in 2025.
The partnership between the two companies is a strategic step for Net Power Inc., a firm specializing in electrical industrial apparatus, as it continues to develop its power plant which is anticipated to feature innovative technology for energy generation.
This material definitive agreement was made public through an 8-K filing with the Securities and Exchange Commission by Net Power Inc., headquartered in Durham, North Carolina. The company, previously known as Rice Acquisition Corp. II, operates under the IRS Employer Identification No. 98-1580612 and is incorporated in the state of Delaware.
Net Power Inc.'s shares and warrants are listed on the New York Stock Exchange under the symbols NPWR and NPWR WS, respectively. This recent development is part of the company's ongoing efforts to establish its presence in the energy sector with the support of Baker Hughes, a known service provider in the industry. The information is based on a press release statement.
In other recent news, NET Power Inc. has been under scrutiny following developments in its financial and operational fronts. Citi revised its price target for NET Power, reducing it from $11.00 to $8.00, maintaining a neutral rating on the stock. This adjustment was made following a visit to NET Power's La Porte demonstration facility, where the complexities of the company's operations and an increase in perceived execution risk led to a reassessment of the cost of capital.
Simultaneously, during NET Power's Q2 2024 earnings call, the company outlined its progress in clean power technology. The company confirmed that their first utility-scale plant, Project Permian, remains on schedule to start between the latter half of 2027 and the first half of 2028. The company ended the quarter with $609 million in cash investments and anticipates an increase in cash flow used in operations due to expansion.
These are among the recent developments for NET Power. The company's strategic supply chain partnerships aim to deploy multiple plants annually by the early 2030s. Despite the adjustments made by Citi, the company continues to focus on the commercial viability of their clean power solution, targeting competitive power markets in the US and Canada.
InvestingPro Insights
Net Power Inc.'s recent $90 million equipment procurement agreement with Baker Hughes marks a significant step in its utility-scale power plant project. However, InvestingPro data reveals some challenges the company faces. As of the last twelve months ending Q2 2024, Net Power reported a revenue of just $0.24 million, with a concerning revenue growth decline of 26.32%. The company's gross profit margin stands at a stark -710.08%, indicating significant operational hurdles.
InvestingPro Tips highlight that Net Power "holds more cash than debt on its balance sheet" and "liquid assets exceed short term obligations," which could provide some financial flexibility as it pursues this ambitious project. However, the company "suffers from weak gross profit margins" and is "not profitable over the last twelve months," underscoring the risks associated with its current business model.
These insights suggest that while Net Power is making strategic moves to advance its technology, investors should carefully consider the company's financial performance and market position. InvestingPro offers 11 additional tips for NPWR, providing a more comprehensive analysis for those interested in delving deeper into the company's prospects.
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