Rolls-Royce explores small nuclear reactor unit funding options including IPO
The consortium led by the UK engineer is in talks to finalise a contract with the government later this year
Rolls-Royce has held exploratory talks with advisers over financing options for its small nuclear business, including an initial public offering, amid growing investor excitement about the nascent technology.
The FTSE 100 engineer was selected to build Britain’s first fleet of small modular reactors in June as part of a plan by the Labour government to make the UK a world leader in the technology. The Rolls-Royce-led SMR consortium is in talks to finalise a contract with the government later this year.
The talks with investment houses and banks focused on future funding requirements of the business, according to two people familiar with the situation. “There is a live debate within the shareholder base,” said one of the people, noting that a listing at a high valuation would generate significant funding.
Other members of the consortium include CEZ Group, the Czech utility, which holds a 20 per cent stake as part of a wider partnership with Rolls-Royce, the Qatar Investment Authority and BNF Resources. There were “different views” among shareholders, the person added.
Discussions were at an early stage, with the Rolls-Royce board not in a rush to make any decision, said the other person. The UK government would be eager to ensure that any listing occurred in London, which has suffered a marked slowdown in flotations in recent years, they added.
Rolls-Royce SMR said the company was “not planning for, or in the process of launching an initial public offering”.
Governments and investors are increasingly backing the potential of SMRs — nuclear reactors that are smaller than the gigawatt plants that have dominated the industry for decades — as a reliable source of low-carbon electricity.
UK government funding for Rolls-Royce, which is still subject to final agreements, involves support to help develop three small modular reactors amounting to almost 1.5 gigawatts of electricity capacity, enough for about 1.5mn homes.
The government has said it will pledge £2.5bn to small modular reactors during this three-year spending review period, helping to develop Rolls-Royce’s technology as well as develop sites for the reactors.
The renaissance in nuclear power has come amid the boom in power-intensive artificial intelligence and as governments worldwide seek to shore up domestic sources of energy.
Technology groups such as Amazon and Google have in recent months struck deals with SMR developers to help power the data centres needed for AI. Oklo, a nuclear start-up backed by OpenAI chief Sam Altman, is valued at more than $11bn.
Companies in the space eyeing possible IPOs include Florida-based Holtec International and Quantum Leap Energy, part of ASP Isotopes.
Quantum Leap said its decision to “pursue a US listing this year reflects both our confidence in the company’s growth trajectory and the appetite we are seeing from international investors”.
Nick Lawson, chief executive of investment group Ocean Wall, which is advising ASP Isotopes on the QLE spin-off, said he was seeing “extraordinary momentum at the intersection of nuclear technology and artificial intelligence”, which included several upcoming listings.
At least three nuclear energy developers are also seeking to raise money through mergers with special purpose acquisition companies.
Tufan Erginbilgiç, Rolls-Royce’s chief executive who has presided over a sweeping turnaround at the group since taking the helm in 2023, has become a vocal proponent of SMRs.
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The engineering group, which remains the majority shareholder in the consortium, is not expected to make a decision on whether to proceed with an IPO until after it has signed the contract with the UK government, as any valuation would depend on the commercial details.
The London-listed company said this summer that it expected the SMR business, which employs about 800 people, to be free cash flow positive and profitable by 2030.
Rolls-Royce last year sold a 20 per cent stake in the business to CEZ Group. Although terms of the deal were not disclosed, the utility was estimated to have paid hundreds of millions of dollars for the stake.