U.S. picks Rolls-Royce for B-52 engines in potential $2.6 bln deal

  • Contract worth an initial $500 mln
  • Rolls-Royce shares rise 5%

LONDON, Sept 27 (Reuters) - Rolls-Royce (RR.L) said on Monday it had been selected to provide engines for the United States Air Force B-52 Stratofortress bombers, in a contract which could be worth up to $2.6 billion to the British engineering firm.

The F-130 engines, which will be made at Rolls-Royce's Indianapolis, Indiana facility, were chosen as replacement engines for the bombers, for an initial $500 million six-year deal, which could rise to $2.6 billion longer-term.

Shares in Rolls-Royce, which beat incumbent supplier Pratt & Whitney part of U.S. company Raytheon (RTX.N), to win the contract, jumped 5% to 139 pence, their highest level since June 2020.

Jefferies analyst Andy Douglas called it a "good" win and said while it wouldn't change numbers straightaway "it provides additional comfort to longer-term consensus forecasts and is a positive for sentiment."

The Pratt engines have powered the famous B-52 aircraft, which can carry nuclear weapons, since the 1960s but will be retired by 2030. The aircraft's manufacturer, Boeing (BA.N), will integrate the new Rolls engines, with the first due for testing by 2025.

Rolls-Royce said its F-130 engine will provide the U.S. with "vastly greater fuel efficiency" while the U.S. said in its statement that it would also increase range and cut maintenance costs.

The new engines will allow the bombers to continue missions into the 2050s.

Reporting by Sarah Young; Editing by Kate Holton, Alistair Smout and Alexander Smith

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