HULT Private Capital Welcomes Qatar’s Investment Into Rolls Royce

HULT Private Capital is welcoming the announcement by the gas-wealthy Persian Gulf state of Qatar that it will be investing in Rolls Royce’s plan for a new generation of “mini” nuclear reactors.  The announcement was a declaration of up to up to £100 million from Qatar funding the development of cheaper and quicker to build reactor designs that will be better than the current generation of traditional reactors.

This announcement means the joining of the Gulf State’s capital with the Perrodo family, a French oil dynasty that made its fortune from the Perenco oil company, the US nuclear producer Exelon Generation, and Rolls Royce in an un-equal four-way partnership to design and build the new more energy efficient reactors.

The new addition of Qatar to the project will dilute Rolls Royce’s share of the project to 80% of the total venture.  This is a preliminary announcement, and once the deal is finalized, the formal announcement of specifics will be expected before the end of November.

According to Chris Bland of HULT Private Capital, a London-based private equity firm, “the addition of Qatar to the project is a deepening of the ties between Rolls Royce and the oil-rich state.  Earlier this month, Rolls Royce and the Qatar Foundation agreed to a deal for the foundation to invest in green tech as a part of a cooperative plan that will create as many as 10,000 jobs and has a goal of developing up to five new billion-dollar businesses.”

When asked for a comment about their deepening relationship with Qatar and the foundation, Rolls Royce declined any response.

Rolls, a FTSE 100 company, has been raising money from several experts in the nuclear field along with investors who have deep pockets and are willing to put up with high risk for equally high returns.  Earlier in the month, Rolls found investors in the form of the Perrodo family and Exelon Generation that was willing to supply a combined £195 in investment capital.  This funding resulted in a further £210 million in taxpayer funding being released for the project.

While this significant amount seems like a lot, according to HULT Private Capital’s Chris Bland, “Rolls Royce is going to require many more hundreds of millions of pounds for the completion of research, testing and the design of the proposed mini power plants.”

HULT Private Capital thinks that the total mini reactor project will end up being close to the estimated $1bn of funding if its development is anywhere close to the price that was seen with its most advanced rival.  This long-term project is expected by its partners to produce the small reactors by the early 2030s; however, this is likely an overly optimistic timetable.

Rolls Royce has set a target for the small reactors to cost £1.8 billion each.  This price is meager compared to a traditional reactor costing up to £23 billion.  The target customers are cities the size of Sheffield (under 600 thousand) with the capability of producing 440 megawatts.  If delivered within the proposed budget, they will be producing one-seventh of the power of the Hinkley Point C reactor in Somerset but for only one-twelfth the price.

The $1.8 billion costs will allow private companies and pension funds to purchase them rather than the requirement of government coffers or ballot initiatives to underwrite the systems.

RR plans to create a standardized production line to produce the plants, which will keep the costs down while also providing flexible power generation of smaller modular units, which can then be grouped to balance power needs when the capacity is required.  Beyond the design of the reactors themselves, there is a need for the machinery that will produce the plants to also be developed and approved by regulators who will prioritize safety above speed.

According to HULT Private Capital’s Chris Bland, the Oregon-based NuScale Power was the first company in the US to receive the Nuclear Regulatory Commission’s approval for its small reactor design. “So far, NuScale has used up about $1.3 billion in a decade of development.  Rolls needs to expect inevitable delays; NuScale spent half a billion dollars in preparation for regulatory applications and then was required to spend another $270 million for the investigation of the design.”

Even with all of their money spent, NuScale is not yet finished; they are in the process of completing their manufacturing trials and the hope is to have a first working mini reactor by 2028.  If this goal is met, all told NuScale will have spent 17 years bringing the project to fruition.

The NuScale reactors are in a modular form where there are four, six, or twelve 77-megawatt reactors.  These can start in a smaller configuration that can be added over time.  The expectation is that the 12-module (924-megawatt) power plant will cost around $3billion on a greenfield site (finance costs excluded).

Rolls Royce should expect a slow schedule.  According to HULT Private Capital’s Bland, “the nuclear regulator works on their own schedule.  From the point of a customer making an order until the plant is operational will be up to seven years; this involves site preparation, module construction, regulator approval, and plant commissioning.  There are companies quoting shorter timeframes, but it is not realistic.”

Rolls Royce may be trying to develop reactors to complement other technologies in their coming portfolio.  The power systems business is targeting a program of cleaning its diesel-fueled engines that power yachts and act as backup power for data centers.  Rolls should also have a hydrogen-powered engine ready for sales to tech firms next year which will be used to create carbon-neutral server farms.

According to HULT Private Capital’s Bland, “the plan is also to convert current diesel generators to power supplies that can use fuel made from CO₂ moving on to other advanced products that require hydrogen.  Significant supplies of hydrogen are needed for nuclear reactors, and local production will also be required.  Devices called electrolyzers can take water and break it into its hydrogen and oxygen constituents.  If renewable power can be used and not produce carbon, then neither will the hydrogen.” Bland finished by saying, “We at HULT Private Capital see the movement forward as a good opportunity for the country and clean energy.  We would like to see more projects begun that will benefit the natation but also that our investors can also participate.”