Net Power (NPWR) Q3 2026 earnings review
Power developer Net Power bought engines, but Texas paused permits
Net Power, which develops gas-fired power plants for data centers, spent heavily on engines before any customer signed a contract. The $118 million it paid in August bought a contract for a gas engine plant at an AI developer's future data center. That payment left about $183 million of cash and investments. Weeks later, Texas paused permits for projects that power data centers.
| Cash and investments | $182.9M $310M three months earlier |
|---|---|
| Paid for the engine contract | $117.6M about 38% of June's cash and investments |
| Customer's maximum cost cover | About $180M only if no power contract by February 14, 2027 |
| Outlook | Unchanged no final investment decision in 2026 |
⚖️ Verdict: 🔴 Bearish
The story got worse because Net Power has its own cash at stake in a project with no site, permits or signed customer. The good news: the AI developer must repay approved costs, up to about $180 million, if talks fail by mid-February.
The question now is whether the AI developer signs a power contract while Texas permits for data centers remain paused. If it signs, Net Power can seek construction funding; otherwise it can only claim back approved costs and look for another buyer. The February 14 deadline will tell.
🐂 Bull Case
An AI Developer Agreed to Cover Equipment Costs
Net Power wants to sell power straight to data centers, off the Texas grid. In August, a prospective customer signed a cost reimbursement agreement during talks on a long-term power contract. The release calls that customer "a leading developer of frontier artificial intelligence models".
If no power contract exists by February 14, 2027, the customer must repay approved costs, up to about $180 million. Those costs already include the engine contract Net Power bought in August. But the filing says the cap "does not represent committed financing or an unconditional payment obligation".
What to watch: a signed power contract before February 14. Net Power says it will make no final investment decision without one, so construction cannot start until the two sides sign.
Spending Fell by Two-Thirds From a Year Ago
Net Power has stopped work on the oxy-combustion cycle, its old gas plant design meant to capture almost all emissions. Ending that Baker Hughes programme cut running costs to about a third of last year's level, by our math.
- Operating expenses before write-downs: $19.8 million, against $60.7 million a year ago
- Research and development: down 63%
- Project development: down 74%
But spending rose from $16.2 million in the second quarter. Net Power booked $3.4 million of extra Baker Hughes wind-down costs and a $1.6 million claim from Entropy, a former carbon-capture partner. Without both, by our math, spending ran near $14.8 million.
What to watch: fourth-quarter operating expenses in the year-end report. A figure below this quarter's would show that the savings hold once the one-off charges end.
🐻 Bear Case
Texas Paused the Permits Net Power Needs
Chief executive Danny Rice said data center customers need "fast, reliable, and scalable power", and Net Power plans to make it on site. Its presentation notes that on-site plants skip the grid connection queue, but adds "permits still required". The gas engines for the first project need air permits from TCEQ, the Texas environmental regulator.
On September 21, the Texas governor told TCEQ to stop issuing permits for data center projects until ERCOT, the state grid operator, finishes a review. TCEQ confirmed the pause in October, and Net Power expects it "to apply to the air permits our Initial Project requires". Nobody has set a date for the pause to end.
That cuts against Rice's promise of speed. On November 3, Texas voters elected a new governor who wants a moratorium on new data center approvals until lawmakers write statewide rules. The legislature meets in January. Net Power also warns that its customer could delay the project or pursue sites outside Texas.
What to watch: ERCOT's report, which the grid operator plans to publish by December 10, and whether TCEQ then restarts data center permits. A moratorium in the January session could delay the first project's permits well into 2027.
Net Power Spent $118 Million Before a Contract
Chief executive Danny Rice said Net Power will "continue to allocate our balance sheet capital prudently". In August, the company paid $117.6 million to take over a contract for a 123-megawatt gas engine plant. Saulsbury Industries will build it with engines from Wärtsilä.
That payment came before Net Power secured a site, permits, financing or a signed customer. Title to the engines has not passed yet, so Net Power holds only a contractual claim on them. Wärtsilä has reserved its position on moving them to the new site. Cash and investments fell to $182.9 million from $310 million in June.
In Net Power's favour, the AI customer's reimbursement promise covers this payment if talks fail. But new spending needs the customer's approval first. Without a final project decision, the quarterly report warns, Net Power "may be unable to recover all of our costs".
What to watch: whether Net Power signs the site change and a limited start order with Saulsbury by November 20. A miss makes a $3.5 million termination fee payable and leaves the engine contract in doubt before any customer has signed.
No Lender or Partner Has Funded Construction
Net Power has cash for its bills but not for building. The release says completing the first project "will require project-level financing and additional capital, none of which has been committed".
Restarting the engine contract alone would cost about $88.2 million over the next 12 months, the filing says. With that commitment and no new money, Net Power's cash would fall short. Selling new shares is the other route, but the quarterly report warns it "would result in significant dilution to our existing stockholders".
What to watch: any project loan, equipment financing or partner investment before March 31, 2027, the deadline for a full start on the engine contract. Without one, Net Power cannot restart that work and still keep a year of cash.
Risks This Quarter Didn't Answer
Four standing risks got no decisive new evidence in the release or the quarterly report. Each item below names the disclosure that would move it.
- Project timing: Project Permian, the West Texas site that was once first in line, is now the second project on "a longer timeline", with no dates; a dated plan for either site would test it.
- Competition: Net Power now builds with standard engines and batteries, which it says fit each data center building; a cost per unit of power against rivals would show whether that is an edge.
- Land at Project Permian: growth beyond the current lease needs more land from Occidental Petroleum, a major shareholder; signed land rights would settle it.
- Lawsuits: a shareholder class action and two suits filed on the company's behalf over past Project Permian statements; a ruling on the motion to dismiss comes next.
👓 Other Themes
Baker Hughes Deal Shelves the Old Technology
On September 8, Net Power and Baker Hughes signed agreements that suspend their oxy-combustion work indefinitely and release each other from past claims. Baker Hughes keeps its licences, and any royalty to Net Power still needs agreement. Net Power expects to dismantle its La Porte test plant, which it carries at no value, around June 2027 unless it sells it.
💲 Other KPIs
The share count grew 2.0% from a year ago, the slowest pace in four quarters. Stock payments to Baker Hughes drove much of earlier growth, and Net Power expects no more of them beyond final bills. Exchanges of partnership units for Class A shares leave the total unchanged.
Interest income fell 49% from a year ago, because Net Power holds less cash and smaller Treasury bill holdings. It now covers about an eighth of quarterly operating expenses, by our math. Each further payment for engines or turbines shrinks the balance that earns it.
What Net Power still owes on its gas turbine sets dipped to $54.4 million from $55.8 million in June. Installments run through 2028, and the developer does not plan to use these turbines at its first project. A new option would add emissions equipment for $12.5 million.
🔮 Guidance
Unchanged. Net Power still says its cash covers the next 12 months, but only if it restarts no major work without committed funding. By our math, restarting the engine contract plus other known payments would take about $141 million in that year, before running costs. That equals 77% of cash and investments. The condition matches June's, but the cash behind it is now smaller.
Unchanged. Net Power still expects no final investment decision in 2026, and none before it signs a binding power contract. The first project now sits at the AI customer's site, and Project Permian has dropped to second place. Since late 2025, the Permian target went from the first half of 2026 to the second half, and then disappeared.
New. Net Power expects to give Saulsbury the full go-ahead to build only once it has financing for the first project. The deadline is March 31, 2027, after which either side may end the contract. That start also triggers a $10.2 million mobilisation payment.
❓ Key Questions
What will the first project cost to build?
Net Power has given no building cost or power price since it dropped carbon capture from its first plant. Without those figures, nobody outside the company can test whether the project earns a return.
Will the AI customer stay in Texas?
Net Power warns the customer could delay the project or pursue sites outside Texas while permits stay paused. A move would end the current site plan, and the engines would then need a new home or a buyer.
Will the customer approve the new engine costs?
The site change and limited start order with Saulsbury need the customer's approval of costs before November 20. Without that approval, Net Power owes a termination fee, and later engine spending falls outside the reimbursement cover.
How much more generating capacity must Net Power buy?
The first project needs capacity beyond the engine plant Net Power bought, and it has not secured that extra equipment. Its size and cost decide how much new funding the project needs.
What happened to Northern MISO and the Occidental deals?
The Northern MISO project and Occidental's planned purchase of power and carbon dioxide have dropped out of recent materials without an update. Shareholders need to know whether Net Power ended, sold or kept them.