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Rolls-Royce (LSE:RR.) announced it has signed a contract with the UK’s Ministry of Defence to deliver two reactor cores to Britain’s nuclear-powered submarine fleet valued at more than £1 billion, confirming reports following an interview with Defence Minister Philip Hammond by the BBC.
The deal was told to be in line with the UK’s move to replace the existing Vanguard fleet, which carries the Trident nuclear deterrent, a plan that is likely not to be well received by Liberal Democrats within the Government’s coalition, arguing that a “like-for-like” replacement is unnecessary.
However, during BBC’s interview with Defence Minister Hammond, he said the decision to replace the Vanguard fleet is yet to be decided until 2016, and that preparations will have to be carried out to provide that option in the future.
“The actual decision to go ahead and build them won’t have to be taken until 2016 and what we are doing at the moment is ordering the things that have to be ordered in order to give us that option.”
Securing A Sovereign Capability
Amidst the clash between the Conservatives and the Liberal Democrats on the UK Government’s policy on nuclear armaments, Minister Hammond stated that the latest contract is a way of “sustaining a sovereign capability in the UK and some very high-end technical skills in the UK for the next 40 or 50 years”.
About £3 billion has already been set aside by the MoD to commence work on new submarines that will replace the four Vanguard class submarines of the Royal Navy.
But Liberal Democrats said there is no need for such a nuclear deterrent, which was established for the purpose of obliterating Moscow during the Cold War and is actively looking for a cheaper alternative of maintaining nuclear warheads, led by party’s defence minister, Nick Harvey.
Conservatives argued, however, that new threats to international security are present twenty years after the Cold War, with “growing fears” surrounding China, Iran, and Russia.
According to reports, one reactor will be built for the seventh and last of the Astute class submarines and the other will be for the Vanguard’s successor-class, the first of which is set to be delivered by 2028.
Included in the contract is the regeneration of Rolls-Royce’s existing submarine reactor core manufacturing facility in Derby, England, reported to be around £500 million, which will continue to be maintained and operated by Rolls-Royce.
“The Group will introduce the latest technology and manufacturing techniques to deliver increased efficiencies committed by the MoD and industry as part of the Strategic Defence and Security Review,” Rolls-Royce disclosed.
COO Comments
Rolls-Royce’ President for Submarines and Chief Operating Officer, commenting on the contract, said:
“This is excellent news that demonstrates the high level of trust the MoD has in both our technology and the expertise of our highly skilled workforce. This new facility will deploy advanced manufacturing techniques to enhance our world leading nuclear manufacturing capability.”
Company Spotlight
Britain’s iconic Rolls-Royce is a world leader in providing power systems and services use on land, sea, and air, servicing the civil aerospace, defence aerospace, marine, and energy sectors.
Established in 1904, Rolls-Royce became public in 1987 and is currently part of the FTSE 100 Index. The company’s share price inched 1.34%, adding 13 pence to £8.35 a share at 1:00 PM GMT.
