Three cheers for Tufan Erginbilgic. The boss of Rolls-Royce is so confident in his engineering giant’s world-beating prowess in developing small modular reactors – known as SMRs – that he reckons it could become Britain’s most valuable company.
This is no modest claim. It suggests the Turkish-born engineer believes Rolls, valued at £92billion on the London Stock Exchange (LSE), has the potential to double in value and knock the existing top three – AstraZeneca, HSBC and Shell – off their perch.
Erginbilgic’s confidence in his company’s potential is uplifting.
It certainly makes a nice change from the constant moaning from so many of his peers who criticise the LSE as an unattractive place to list.
In fact, the reverse is true. Rolls has no need to shift its listing to New York to achieve higher valuations, a switch that both Astra and Shell are said to be considering as they seek higher multiples.
If you explain your strategy well, as Erginbilgic – known for his red-meat ‘ruthless’ approach to business – has, then better valuations will follow.
Optimistic: Erginbilgic’s confidence in his company’s potential is uplifting
Rolls has amply demonstrated this, even with half of its investors and customers in the US. Since he took over, shares have risen an astonishing tenfold.
What’s more, shares are likely to keep rolling because of the enormous appetite for energy needed to power Artificial Intelligence (AI) data centres.
He reckons the demand is so great the world will need at least another 400 SMRs over the next 25 years. As the units cost around $3billion a shot, that’s a potential market of at least $1trillion (£740billion).
Rolls is ahead of the game. It has already signed deals to build three SMRs for the UK government, and six for the Czech Republic. And Erginbilgic is confident it will stay ahead of the game.
‘If we are not the market leader globally, we did something wrong,’ he told the BBC. That sounds unlikely: it has cutting-edge SMR technology which has emerged from its work for nuclear submarines going back decades.
It is also well placed because it won the UK competition to supply Great British Energy – Nuclear, which has stimulated interest from around the world.
Yet there are two big unknowns. First, what shape will the market for AI data centres, which need 24/7 power, take over the next few years?
Tech giants such as Microsoft and Amazon are already working on plans to build their own power sources, and the ability to sell excess off-grid.
The forecasts for demand are mind-boggling. The International Energy Agency estimates that electricity demand from data centres worldwide is set to more than double by 2030. That’s slightly more than the entire electricity consumption of Japan today.
Demand from AI data centres is likely to more than quadruple by 2030.
And in the US alone, AI is set to gobble up more electricity over the next five years for processing data than for manufacturing all energy-intensive goods from aluminium to chemicals.
Secondly, and more importantly for the UK, there’s the question of whether Rolls will build the SMRs in British factories or sell the licence to overseas manufacturers and collect fees.
And even if the Derby-based giant wants to build in the UK, does the workforce have the necessary skills?
Erginbilgic is optimistic, claiming that SMRs are the single biggest opportunity for the UK’s economic growth.
He’s been proved right in the way he’s transformed Rolls from being a ‘burning platform’ into one of the hottest stocks in town. And they may get hotter still: worth a buy.
Nation of shoplifters
How tragic that Iceland’s chairman Richard Walker says shoplifting has now reached such epic proportions that it is the law-abiding people who feel that they are on trial, rather than the lawless.
But this lack of respect has been a long time coming, starting with those awful, aggressive signs in public places warning customers not to be rude to staff and then made worse by the plastic screens put up in shops during lockdown.
That’s a sure way to break down trust. Napoleon would have to rework his description of Britain as a ‘nation of shopkeepers’ to one of shoplifters.
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