Net Power Inc. (NPWR)

Item 2. 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 condensed consolidated results of operations and financial condition and includes forward-looking statements that involve risks, uncertainties and assumptions, including those described in “Cautionary Note Regarding Forward-Looking Statements” included in the forepart of this Quarterly Report on Form 10-Q (our “Quarterly Report”), in Part II, Item 1A Risk Factors in this Quarterly Report, and in Part I, Item 1A Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2025 (our “Annual Report”), as filed with the SEC on March 9, 2026.

The following MD&A should be read in conjunction with our condensed consolidated financial statements and related notes included in Part I, Item 1 in this Quarterly Report and our audited consolidated financial statements and related notes included in our Annual Report.

Overview

We are an energy technology and project development company focused on the development of natural gas power generation projects. 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. As part of our strategic shift to meet growing market demand for reliable power on accelerated timelines, we have broadened our development activities to include traditional gas power generation equipment and PCC solutions. Our near-term commercial strategy prioritizes the rapid deployment of natural gas power generation to serve large-load customers, initially without carbon capture. We are engaged in ongoing negotiations with Entropy regarding one or more potential commercial arrangements relating to the deployment of its PCC Technology for projects we develop. The parties’ prior letter of intent has expired by its terms and has not been replaced, no definitive agreement has been executed, and either party may discontinue negotiations at any time. There can be no assurance that definitive agreements with Entropy will be executed on any particular terms, within any particular timeframe, or at all. We are not contractually committed to any single technology provider, and we continue to evaluate technology, partnership and project structures that support that strategy. We undertake no obligation to provide updates regarding the status of these negotiations except as required by applicable law. See Part II, Item 1A “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”

Under our current strategy, our projects are expected to generate revenue from the sale of the products and attributes they produce, principally electricity and, where carbon capture is deployed, captured CO₂ and associated environmental attributes. If and to the extent carbon capture is deployed at Project Permian Phase I or any subsequent phase, captured CO₂ is intended to be sold or delivered for sequestration in connection with enhanced oil recovery operations in the Permian Basin or for other geologic storage. We have not entered into any definitive agreement for the sale, transportation, or sequestration of CO₂, and there can be no assurance that we will enter into any such agreement on acceptable terms or at all.

Beginning in the fourth quarter of 2025 and continuing through 2026, we repositioned our business around the commercial deployment of natural gas power generation equipment designed to accommodate post-combustion carbon capture technology in later phases. Currently, we do not have any plans to resume development of the Oxy-Combustion Cycle, nor do we expect the initial phase of Project Permian Phase I to include carbon capture. Consistent with these current plans, we have suspended development activities under the BHES JDA, we have adjusted our workforce in areas affected by these changes, and we have recognized a full impairment of the related developed technology assets (see Note 5 to our condensed consolidated financial statements).

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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 negotiate and enter into binding power offtake agreements at prices and on terms sufficient to support project financing and a FID; the timing and outcome of grid interconnection processes, including ERCOT’s recently adopted batch framework for large-load interconnection and the verification and audit of data center projects directed by the Governor of Texas on August 3, 2026; the timing and outcome of air permitting for the generation configuration we ultimately select, the basis for which has not been confirmed and which may change if that configuration changes; the availability, cost, and delivery timing of gas turbines and related long-lead equipment, for which manufacturer backlogs currently extend multiple years; our ability to license PCC technology from Entropy or other providers; our ability to identify, acquire, or develop co-located load resources, including through land, interconnection queue positions, options, or co-development arrangements, and to obtain the related regulatory and interconnection approvals; potential supply chain issues, including as a result of tariffs or cost escalation; changes in tax policies and other incentives supporting carbon capture, including the federal tax credit available under Section 45Q of the Internal Revenue Code, as enhanced by the Inflation Reduction Act of 2022 and further amended by the One Big Beautiful Bill Act of 2025 (which, for facilities or equipment placed in service after July 4, 2025, provides credit values of up to $85 per metric ton for qualified carbon oxide used as a tertiary injectant in enhanced oil or natural gas recovery or otherwise utilized, in parity with secure geological storage), the value, transferability, and monetization of which are subject to evolving statutory and regulatory requirements; 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, including natural gas combined-cycle plants without carbon capture, renewable generation paired with battery energy storage systems and small modular nuclear reactors, many of which are being pursued by developers with greater financial resources and established customer relationships. 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, including the ongoing conflicts in the Middle East, may lead to a delay in our commercialization efforts, which could impact our results of operations, financial condition and prospects. Also, currency fluctuations, inflation, 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

We are developing our first commercial power generation project at the Project Permian site in West Texas. The project is being sized to accommodate up to approximately one gigawatt of power generation capacity, to be developed in phases, with the configuration, carbon capture scope and ancillary solutions for each phase dependent on customer requirements, commercial arrangements, equipment availability, and financing, and potentially including natural gas generation deployed in advance of, or without, carbon capture. Based on current market demand and the commercial feedback we have received, we do not expect to deploy post-combustion carbon capture in the initial phase of Project Permian. Development of the contemplated capacity would also require additional land and development rights beyond those we currently hold. We intend for the first phase of Project Permian to utilize gas-driven power generation equipment, including gas turbines; the carbon capture configuration of the project, including the scope and timing of any PCC deployment, will be determined in connection with definitive commercial arrangements and financing. 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 in Project Permian Phase I.

We lease the Project Permian Phase I site from a subsidiary of Occidental Petroleum, which is a significant stockholder and a related party of the Company, under a lease that became effective December 1, 2024 and has a 60-month initial term, and that includes an option to purchase the leased premises.Our leasehold provides the acreage required to site the power generation equipment we have contracted to purchase and to support the initial phase of the project as currently configured, and the site is located within a larger ranch owned by affiliates of Occidental Petroleum. Developing the project beyond the initial phase would require additional land

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rights from those affiliates, which we have not obtained and which would be subject to negotiation and to their consent, and a co-located configuration would require additional or different site and land-use arrangements that we have not obtained. The Project Permian site is being designed with flexibility to meet potential customers’ needs. The project is being evaluated for the potential addition of carbon capture in later phases, which if deployed may be installed either concurrent with or subsequent to the installation of the accompanying gas power generation equipment. The engineering and cost of that capability have not been finalized. Carbon capture would be deployed subject to customer requirements, the availability of post-combustion carbon capture technology on acceptable terms, the availability of arrangements for the transportation, utilization or sequestration of captured carbon dioxide, none of which we have entered into, permitting, and financing. We may also seek to interconnect the project’s power generation facilities to the ERCOT grid, subject to the interconnection processes described in Part II, Item 1A.

We have not entered into a binding power offtake agreement, project-level financing agreement, or definitive site or land-use arrangement specific to a co-located configuration, and we have not made a final investment decision for Project Permian Phase I. There can be no assurance that we will enter into any such agreement, that Project Permian Phase I will be developed in the configuration or on the timeline described, or that carbon capture will be deployed at any phase of the project. Our development planning previously targeted a final investment decision as early as the second half of 2026. We no longer expect an FID to occur during 2026, and we have not established a new target date for FID or the commencement of commercial operations. Any FID will depend on, among other things, execution of one or more binding power offtake arrangements at pricing and other terms supportive of the project’s economics, and on obtaining the necessary site rights, financing, equipment, permits and other approvals. We do not expect to make an FID before such arrangements are executed. In order to meet prospective customer requirements for first power or more power than our current contracted equipment can deliver, we are evaluating whether to enter into additiona

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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.

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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:

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%, for the year ended December 31, 2025, as compared to the year ended December 31, 2024. This increase was primarily attributable to higher employee

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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 Cycle technology, including testing at our La Porte Demonstration Facility and 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 Facility that 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 Cycle technology 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 Cycle technology project. Accordingly, the Company began expensing costs associated with the project as management assessed the Oxy-Combustion Cycle technology 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 of 2025, 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

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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 and Warrant 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

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