June 14, 2010 / 9:45 PM / 9 years ago

UPDATE 1-Bill Gates-backed nuclear start-up raises $35 mln

* TerraPower raises $35 mln in new round of funding

* Gates, Charles River Ventures, Khosla Ventures investors

* Investor says co. attracting interest from other players

* TerraPower aims to have test reactor in few years (Adds comments by Intellectual Ventures’ Nathan Myhrvold)

By Poornima Gupta

SAN FRANCISCO, June 14 (Reuters) - TerraPower, a nuclear energy start-up backed by Microsoft Chairman Bill Gates, has raised $35 million in a new round of funding to aid the development of a reactor fueled by nuclear waste.

Concerns about global warming and efforts to reduce carbon emissions have sparked renewed interest in nuclear energy as a clean fuel, but the difficulty of disposing of spent uranium and fear of accidents have made the technology controversial.

Original investors Gates and Waltham, Massachusetts-based venture capital firm Charles River Ventures (CRV), and new investor Khosla Ventures participated in the latest Series B round, Izhar Armony, general partner with CRV, said in an interview on Monday.

TerraPower is a nuclear spin-off project from Bellevue, Washington-based incubator Intellectual Ventures, which is run by former Microsoft Chief Technology Officer Nathan Myhrvold.

“We have been an investor since it was just an invention, an idea,” Armony said. “The company has had great progress and we felt it is time to put more wood behind the arrow, so to speak, to really allow them to accelerate development.”

TerraPower is working to develop so-called traveling-wave reactors, which would use depleted uranium as fuel and have the potential to run up to 100 years without refueling.

Current nuclear reactors use enriched uranium, require frequent refueling and produce a lot of waste.

Myhrvold said TerraPower’s new approach of burning nuclear waste from existing reactors has a significant cost and safety advantage from traditional reactors.

“We are in the process of doing reactor design and simulation and we will be in that phase for another couple of years,” Myhrvold said in an interview. “Within a few years, we hope to have relationships and partnerships for building a reactor.”

TerraPower, which is aiming for a 1.1 gigawatt test reactor, hopes to be selling commercial reactors by 2020, he added.

PARTNER KEY FOR TEST REACTOR

Gates has touted TerraPower’s promise in various public forums and told a conference in February that TerraPower’s technology was more reliable than wind or solar. He has also said the reactor would be safer than current nuclear plants as it burns waste.

Commercializing TerraPower and building a nuclear reactor would cost billions, but the company does not plan to go it alone.

“We don’t necessarily envision TerraPower to be in the business of building reactors itself,” Armony said. “Reactors are very, very expensive. So TerraPower will go to market with partners.”

Myhrvold said apart from cost, the process of the building a nuclear reactor is fraught with regulatory and political difficulties.

“We have to find some part of the world that is willing to have our test reactors,” he said. “We are hoping that will be a quick and easy process, but it may not be.”

The countries that could potentially be favorable in housing the reactor include France, Russia, India and China, among others. The United States, on the other hand, has had no new reactors for about three decades.

TerraPower has attracted the attention of other nuclear players including Toshiba Corp. (6502.T)

The Japanese microchip giant, which owns U.S. nuclear company Westinghouse Electric Co LLC, said in March it was in preliminary talks with the start-up to develop the reactors.

Armony and Myhrvold declined to comment on the talks with Toshiba but both said TerraPower was receiving a lot of interest from industry players.

“We have met most of the companies that could be a potential partner,” Myhrvold said. “What we want to do is take our advanced technology and combine it with a partner’s ability to build these things and build a test reactor.” (Reporting by Poornima Gupta; Editing by Steve Orlofsky and Matthew Lewis)

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