Company: NPWR-WT
Filing Date: 2025-03-10
Form Type: 10-K
Source: 0001845437-25-000008
Chunk: 121

Company: NET Power Inc.
Filing Date: 2025-03-10
Form: 10-K
Item: Item 1A
Chunk 121
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 Power Inc. expects that the payments it will make under the Tax Receivable Agreement may be substantial and could have a material adverse effect on Net Power Inc.’s financial condition and liquidity. To the extent that Net Power Inc. is unable to make timely payments under the Tax Receivable Agreement for any reason, the unpaid amounts will be deferred and will accrue interest until paid; however, nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivable Agreement and would therefore accelerate payments due under the Tax Receivable Agreement, as further described below. Furthermore, Net Power Inc.’s future obligation to make payments under the Tax Receivable Agreement could make it a less attractive target for an acquisition. 

In certain cases, payments under the Tax Receivable Agreement may exceed the actual tax benefits Net Power Inc. realizes or may be accelerated. 

Payments under the Tax Receivable Agreement are based on the tax reporting positions of Net Power Inc., and the IRS or another taxing authority may challenge, which a court may sustain, all or any part of the tax basis increases, as well as other tax positions that we take. In the event that any tax benefits that we initially claim are disallowed as a result of such a challenge, we would not be reimbursed for any excess payments that may previously have been made under the Tax Receivable Agreement. Rather, excess payments made to such holders will be netted against any future cash payments otherwise required to be made by us, if any, after the determination of such excess. A challenge to any tax benefits claimed by us may not arise for a number of years following the time payments are made in respect of such benefits or, even if challenged soon thereafter, such excess cash payment may be greater than the amount of future cash payments that we might otherwise be required to make under the terms of the Tax Receivable Agreement, possibly resulting in insufficient future cash payments against which to net such excess. As a result, in certain circumstances, we could make payments under the Tax Receivable Agreement in excess of our actual income or franchise tax savings, and such excess payment could materially impact our cash flows and financial condition. 

Moreover, the Tax Receivable Agreement provides that, in the event that (i) we exercise our early termination rights under the Tax Receivable Agreement, (ii) certain changes of control of Net Power occur (as described in the Tax Receivable Agreement), (iii) we, in certain circumstances, fail to make a payment required to be made pursuant to the Tax Receivable Agreement by