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Reaction Engines, the British aerospace pioneer hoping to make hypersonic flight a reality, has told investors it needs to raise close to £20mn in new capital or risk falling into administration.
The Oxfordshire-based company has been in talks with its existing backers, including the UAE-backed Strategic Development Fund, about a much needed fundraising, according to people familiar with the situation. The cash would provide new working capital. That would give Reaction Engines the 18 months it needs to fulfil key contracts and generate new revenue streams.
Reaction Engines declined to comment on the talks, but people familiar with the situation said the company would probably need between £15mn and £20mn.
Although SDF is in detailed talks to invest more, Reaction Engines’ other backers have yet to show their hands. The company’s main strategic investors, FTSE 100 groups BAE Systems and Rolls-Royce, which together own just under 24 per cent, declined to comment. Other shareholders, which include asset management firm Baillie Gifford, could yet join another fundraising, said the people close to the talks.
Reaction Engines has previously raised more than £150mn, including £40mn from SDF in 2023, and more than quadrupled its commercial revenues last year. The company, however, had already warned this year that it would need to raise additional financing after it missed internal forecasts and its losses deepened.
While the company is focused on securing new funding, it will probably have to go into administration if that is unsuccessful, according to the people close to the talks. PwC, the accountancy firm, has been put on standby for that eventuality.
Reaction Engines’ predicament has raised questions over the future of a company that was founded in 1989 on the promise that its technology could revolutionise access to space. Hypersonic vehicles travel at five times the speed of sound or more — far faster than conventional supersonic aircraft.
Its engineers have been developing a hybrid jet and rocket engine, Sabre. The innovative engine was originally planned to power Skylon, a space aircraft also designed by Reaction. Key to Sabre is the company’s pre-cooling technology which dissipates heat and prevents engines from overheating.
Reaction, which has been led by former Rolls-Royce executive Mark Thomas since 2015, has more recently also looked to develop commercial applications for its pre-cooling technology for other industries such as energy.
Together with Rolls-Royce, Reaction Engines is also part of a UK-led military project, designated HVX, to pursue reusable hypersonic air vehicle technologies. The consortium, which also includes the Royal Air Force and the defence research agency Defence Science and Technology Laboratory, had hoped to fly a demonstrator vehicle as early as the middle of this decade.
Nick Cunningham, analyst at Agency Partners, called the technology “absolutely alluring . . . like science fiction”.
Cunningham said that “at worst, the company might end up making heat exchanger products for commercial applications”. But he said there were questions over the size of the end market for Reaction Engines’ original ambitions for the technology — offering a single stage to orbit aircraft or hypersonic vehicles.
These applications were “problematic” from the point of view of working out the end demand, Cunningham said.
“Just because you can do it, does it mean it will be done and is there enough of a market, especially in the UK given the constraints on the defence budget?” he asked.
The Labour government has launched a strategic defence review in an effort to cut costs and some industry experts believe there is no certainty that the hypersonic programme will survive. Supporters of the company, however, believe its groundbreaking technology has strategic value for the UK at a time when other countries are investing heavily in hypersonics.
The government said it had a “long-running relationship” with Reaction Engines and would “closely monitor” all its supply chains to ensure the “continued delivery of key capabilities, including research and development”.
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