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Rolls-Royce has sold a minority stake in its small nuclear reactor business to Czech utility CEZ as part of a wider strategic partnership between the two companies to deploy the nascent technology.
The agreement, which will see CEZ take a 20 per cent stake, comes after the Czech Republic last month chose Rolls-Royce as its preferred supplier to build small modular reactors (SMRs) in the country. Although the terms of the deal have not been disclosed, CEZ is estimated to have paid hundreds of millions of dollars for the stake, according to people familiar with the situation.
Governments around the world are interested in the potential for SMRs — nuclear reactors that are smaller than the gigawatt-scale plants widely built around the world — to provide a reliable electricity supply to meet rising demand without generating carbon emissions.
Tufan Erginbilgiç, chief executive of Rolls-Royce, said the partnership with CEZ “further strengthens our ability to build stable, secure, low-carbon power”.
The two companies said they planned to deploy “up to 3GW of electricity” in the Czech Republic using Rolls-Royce reactors. The Czech state has an almost 70 per cent stake in CEZ.
Erginbilgiç, who has presided over a significant overhaul of the FTSE 100 engineer since he took the helm in January 2023, has been open about the need to bring in new investors into its nuclear venture. Recently filed accounts for the SMR business showed that it posted a loss of £78mn to the end of December 2023, up from £61mn the previous year, as it increased spending on development.
Current backers of the venture include BNF Resources, owned by France’s billionaire Perrodo family, US energy group Constellation and the Qatar Investment Authority. The partners have so far invested about £280mn. The UK government has also provided £210mn in grant funding to help it through the rigorous nuclear reactor regulatory process.
Rolls-Royce SMR told the Financial Times that the agreement with CEZ was a “key element” of its “overall funding and deployment strategy”. It said further steps could include “equity injections as well as funding from commercial contracts”.
Utility groups and governments hope that SMRs can be deployed more quickly and without the cost blowouts that have plagued many large-scale projects in recent years.
They typically describe reactors with a capacity of 300MW or less, capable of powering hundreds of thousands of homes, although the Rolls-Royce reactor is larger at 470MW.
However, there are only a few in operation around the world, and it is not yet clear whether the benefits will materialise, particularly given rapid developments in competing renewables and storage technology.
The sector has been given a major boost in recent weeks due to deals with power-hungry technology giants. Amazon is buying a stake in US developer X-energy, while Google has struck a deal for SMR capacity from California-based Kairos Power.
In the UK, Rolls-Royce is among four companies picked in September to move into the next stage of negotiations with the UK government for support to develop the technology in the country.
All but one of the UK’s current fleet of ageing nuclear reactors is set to close by the end of the decade, opening up a gap in power supplies just as the rise of electric vehicles adds to demand.
Only one new plant, Hinkley Point C, is at present being constructed, while a final investment decision on a planned second, Sizewell C, has yet to be reached.
