NET Power to Combine with Rice Acquisition Corp. II to Accelerate Decarbonization of Natural Gas Power Generation

• NET Power’s proven technology generates near zero-emissions utility-scale power, delivering the world’s first scalable solution that achieves the energy trifecta: clean, reliable, low-cost power.
• Implied pro forma enterprise value of $1.459 billion and will be publicly listed under the ticker symbol “NPWR”.
• $235 million of committed investments -- with participation from the Rice family, Occidental, Constellation, 8 Rivers, HITE Hedge, and NGP -- are expected to fund corporate operations through planned commercialization in 2026.
• Experienced energy executive Danny Rice will join NET Power as its new CEO upon closing of the transaction. Mr. Rice led Rice Energy and Rice Midstream Partners to over $10 billion of exits.
• Growing project pipeline and planned utility-scale plant deliveries starting in 2026 position NET Power to capture substantial market share and reduce global emissions on a gigatonne scale.

December 14, 2022 07:03 AM Eastern Standard Time
DURHAM, N.C.--(BUSINESS WIRE)--Rice Acquisition Corp. II (NYSE: RONI) (“RAC II”), a special purpose acquisition company focused on supply-side decarbonization solutions, and NET Power, LLC (“NET Power”) today announced a definitive agreement to enter into a business combination (the “transaction”) to accelerate deployment of NET Power’s proprietary technology that delivers clean, reliable, and low-cost power from natural gas. After the business combination, the company will be named NET Power Inc. (the “combined Company”). The transaction is expected to close in the second quarter of 2023 and the combined Company will be listed on the NYSE under the ticker symbol “NPWR”.

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Upon closing of the transaction, Ron DeGregorio, current CEO of NET Power and 40-year power and energy veteran who successfully led NET Power through technology validation and establishment of key supplier partnerships, will be succeeded by Danny Rice, current director of RAC II and former CEO of Rice Energy, Inc., to lead NET Power through commercialization and beyond. The leadership team and board of directors of the combined Company have decades of experience in operations, engineering, management, and investment in energy and power generation.

“We have long believed that if you can use natural gas, generate reliable electricity, and capture the resulting emissions, you would change the world. For over a decade, NET Power has worked tirelessly to prove its game-changing technology, which we did through our demonstration facility in La Porte, Texas. Following the strategic investment and partnership with Baker Hughes to deliver key turbomachinery for future NET Power plants, this transaction properly capitalizes NET Power and enables the company to commercialize this revolutionary technology. The Rice Group is a logical strategic partner, and I am excited to hand the reins to Danny to lead NET Power,” said retiring CEO Ron DeGregorio.

Incoming CEO Danny Rice said, “Today, around 60% of global power generation comes from coal and natural gas-fired power plants that produce reliable and low-cost power. However, these plants collectively emit nearly 14 billion tonnes of CO2 per year, accounting for approximately 37% of total global emissions. By replacing these plants with NET Power’s proven technology, we can eliminate nearly 100% of these emissions while providing reliable and low-cost power that people deserve. I’m excited to help NET Power deliver the energy trifecta and become the global leader in clean power generation.”

Vicki Hollub, President and CEO of Occidental, said, “We are excited to support this transaction, which will further NET Power’s commercialization plans and help achieve decarbonization goals globally. We first invested in NET Power because we believe the technology can accelerate Oxy’s efforts to reduce emissions in our existing operations and ultimately supply emissions-free power to the Direct Air Capture (“DAC”) sites and sequestration hubs we are developing.”

Occidental is advancing feasibility studies to incorporate NET Power plants into DAC hubs being developed by its 1PointFive subsidiary, where approximately 30 – 40 plants could provide enough clean power for a DAC program capturing 100 – 135 million tonnes of CO2 per year.

Rod Christie, Executive Vice President of Industrial & Energy Technology at Baker Hughes, said, “Our strategic partnership focused on technology development and accelerating market positioning and deployment of the NET Power solution presents a clear path to commercialize near-zero emission natural gas power around the world. The combination of NET Power with Rice Acquisition Corp. II further reinforces the path towards making that progress a reality.”

Cam Hosie, CEO of 8 Rivers, said, “This transaction enables NET Power’s technology to become a cornerstone of the clean energy future. 8 Rivers is proud to have supported NET Power from the beginning, and we will continue to support NET Power’s global deployment by leveraging our commercial and project management expertise while driving deployments through our net-zero solutions business, Zero Degrees.”

Investment Highlights

Opportunity: Power generation is the largest source of global emissions, totaling approximately 14 billion tonnes annually, primarily from coal and natural gas-fired power plants. Global decarbonization requires lower-carbon power generation solutions but today’s lower-carbon solutions are unreliable, unaffordable, or limited by scale. NET Power was designed with the operational flexibility to complement wind and solar in markets with high renewable penetration and the baseload reliability to meaningfully decarbonize markets predominantly powered by carbon-emitting coal and natural gas-fired power plants. Replacing retiring power plants and meeting new demand from electrification would equate to approximately 17,000 NET Power plants globally with over 1,300 plants in the U.S. alone.

Technology: NET Power’s proprietary process combines oxy-combustion (combustion of natural gas with pure oxygen) with a supercritical CO2 power generation cycle to generate electricity. This patented, high-efficiency cycle inherently captures over 97% of CO2 which can then be utilized or sequestered, transforming natural gas into clean baseload power. NET Power is designed to generate reliable power with a carbon intensity similar to solar or wind coupled with a short-duration battery at a levelized cost of electricity of approximately $21-$40 per megawatt hour. A single utility-scale 300 MW NET Power plant would generate enough electricity for over 220,000 homes per year in the U.S. Learn more about the technology at: https://netpower.com/technology.

Business: NET Power is an asset-light technology licensor with rights to a substantial and growing intellectual property portfolio. Each technology license is expected to generate approximately $65 million of present value (PV10) net to NET Power.

Momentum: The company realized several key milestones over the past year, including:

• Proving the Technology: In November 2021, the company’s demonstration facility in La Porte, Texas synchronized to the grid, proving the oxy-combustion and supercritical CO2 process.
• Preparing for Commercialization: In early 2022, the company formed a strategic partnership with Baker Hughes to design and manufacture key plant equipment including turboexpanders.
• Compelling Economics: Passage of the Inflation Reduction Act in 2022 increased the 45Q tax credit for CO2 sequestration. Under the revised 45Q, a NET Power plant, which is designed to capture up to 820,000 tonnes of CO2 per year, becomes more economic to deploy than carbon-emitting coal and natural gas-fired alternatives.

• De-risking Commercialization: In November, NET Power announced its plan to develop and build its first utility-scale project (Serial Number 1, or “SN1”) with the support of its strategic shareholders. The project, located at an Occidental hosted site near Odessa, Texas, targets 300 MW of near zero-emissions power and is designed to significantly de-risk the commercialization of NET Power’s technology. Learn more about the project at: https://www.prnewswire.com/news-releases/net-power-announces-its-first-utility-scale-clean-energy-power-plant-integrated-with-co2-sequestration-301669970.html.

• Industry-leading Strategic Partners: NET Power’s shareholders, representing approximately 70% of pro forma ownership (assuming no redemptions), are leaders in the energy industry, with deep experience across energy production, energy transportation, power generation, manufacturing, operations, sales, services, and CO2.

• Occidental (NYSE: OXY), NET Power’s largest shareholder, is an international energy company with 50 years of experience in large-scale CO2 transportation, use and storage. Occidental is applying its carbon management experience to advance new low carbon initiatives to help achieve net-zero emissions in its operations and help others do the same. As previously announced, Occidental will host NET Power’s first utility-scale plant (SN1) at its operations near Odessa, Texas in the Permian Basin.

• Baker Hughes (NASDAQ: BKR) is an energy technology company and is jointly developing and marketing NET Power’s suite of integrated equipment and technologies, including supercritical CO2 turboexpanders.

• Constellation (NASDAQ: CEG) is the largest provider of carbon-free power in the U.S. with more than 32,000 MW of generating capacity. Constellation has operational and market experience with large scale generation assets.

• 8 Rivers Capital, LLC is a full-service net zero solutions provider leading the invention and commercialization of sustainable, infrastructure-scale technologies for the global energy transition. 8 Rivers invented NET Power’s oxy-combustion thermodynamic cycle and now provides project development support for NET Power.

Transaction Highlights

• Business combination of RAC II and NET Power at pro forma enterprise value of $1.459 billion.
• Assuming no redemptions, the transaction is expected to provide NET Power with approximately $535 million of cash net of transaction fees, consisting of $347 million of cash in trust of which $10 million is subject to a non-redemption agreement, and $225 million of PIPE commitments. Total committed investment of $235 million is comprised of $100 million from the Rice Family and affiliates through a $90 million PIPE commitment and $10 million non-redemption agreement, and PIPE commitments of $100 million from Occidental, $5 million from 8 Rivers, $5 million from Constellation, and $25 million from other investors.
• Net proceeds of $200 million secured through the committed investments are expected to fully fund corporate operations through commercialization of SN1 with expected commissioning in 2026. Net proceeds above $200 million are expected to advance and support commercialization, including funding of SN1.
• Existing NET Power shareholders are rolling 100% of their equity into the combined Company and will own approximately 70% of the pro forma equity assuming no redemptions.

The business combination, which was recommended to RAC II’s board of directors (the “RAC II Board”) by RAC II’s management team, has been unanimously approved by the RAC II Board and is expected to close in the second quarter of 2023, subject to certain closing conditions, including receipt of approval by holders of a majority of the shares held by RAC II’s shareholders. The business combination was also recommended to NET Power’s board of directors (the “NET Power Board”) by NET Power’s management team and has been unanimously approved by the NET Power Board.
Advisors

Guggenheim Securities, LLC acted as lead financial advisor to RAC II. Barclays Capital Inc. also served as financial advisor to RAC II. Kirkland & Ellis LLP served as legal counsel to RAC II. Credit Suisse Securities (USA) LLC acted as financial advisor and capital markets advisor to NET Power. Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. served as legal counsel to NET Power. Barclays Capital Inc. and Citigroup Global Markets Inc. acted as capital markets advisors to RAC II. Barclays Capital Inc. and Citigroup Global Markets Inc. acted as lead placement agents and Credit Suisse Securities (USA) LLC acted as co-placement agent on the PIPE. Vinson & Elkins L.L.P. served as legal counsel to the capital markets advisors and placement agents.

Investor Presentation

For more information, please view the investor presentation on the NET Power website at https://netpower.com/investor-relations/. A recorded presentation from management discussing the business combination will also be available here on December 14th at 7:03 am Eastern Time and a transcript of this webcast will be filed by RAC II with the SEC.

About NET Power

NET Power is a clean energy technology company with a mission to globally deliver the “Energy Trifecta”: Reliable, Clean, and Low-Cost power. The company invents, develops and intends to license technology that provides reliable, on-demand natural gas power with life cycle emissions that are approximately 90% below today’s combined cycle natural gas systems and in line with renewables coupled with batteries. The technology also delivers a levelized cost of energy that is below both combined cycle gas turbines with carbon capture and renewables coupled with batteries. Founded in 2010 and headquartered in Durham, North Carolina, NET Power has received strategic investments from key industry partners including Occidental, Baker Hughes, Constellation, and 8 Rivers.

About Rice Acquisition Corp. II

RAC II is led by Daniel Rice IV and Kyle Derham, former executives of Rice Energy, Inc. (“RICE”) and Rice Midstream Partners (“RMP”). In 2018 and 2019, RICE and RMP merged with EQT Corporation (NYSE: EQT) and EQT’s midstream affiliates for over $10 billion to become the largest U.S. natural gas producer. Rice Acquisition Corp. led a 2021 business combination with Archaea Energy LLC and Aria Energy LLC to create Archaea Energy, Inc. (NYSE: LFG), an industry-leading renewable natural gas platform that BP p.l.c. (NYSE: BP) agreed to acquire for a cash consideration of $4.1 billion in October 2022, generating a 2.6x return on investment for LFG PIPE investors in approximately one year. Daniel Rice currently serves on the board of EQT and Archaea Energy, Inc. The RAC II website is https://ricespac.com/rac-ii/.