Re Contract

25 July, 2007

        ROLLS-ROYCE SIGNS £1 BILLION 10-YEAR SUBMARINE SUPPORT CONTRACT        

Rolls-Royce, a world-leading provider of power systems and services for use on
land, at sea and in the air, has signed an innovative 10-year contract with the
UK Ministry of Defence worth £1 billion to help keep Royal Navy submarines at
sea.

It covers support of nuclear powerplant systems on board the current fleet of
13 Swiftsure, Trafalgar and Vanguard class submarines and the new Astute class
submarines when they enter service.

The contract breaks new ground - Rolls-Royce and MoD will form a joint team to
set agreed service levels, and the company will be paid for meeting those
targets rather than through individual contracts.

Rolls-Royce will also receive additional incentive payments for improvements
which create savings for the Ministry when the submarines are in service. Both
parties will also share any savings made through improved business efficiency
and effectiveness.

The new working arrangements respond to the Ministry's requirement for closer
co-operation from its contractor base to better manage costs, as outlined in
the Defence Industrial Strategy White Paper.

Minister of State for Defence Equipment and Support, Lord Drayson, said: "This
landmark partnering contract ensures the United Kingdom secures its ability to
manufacture and support this strategic equipment in the future. It will deliver
more cost-effective management of submarine maintenance and safeguard jobs and
essential skills in the UK. This is a key element of the Defence Industrial
Strategy aimed at maximising benefits to the front line, and is a major step
forward for the reshaping of those parts of our industries that support the
vital military capabilities provided by Royal Navy nuclear submarines."

Steve Ludlam, Rolls-Royce President - Submarines, said: "We are committed to
working ever more closely with the MoD to reach jointly agreed goals. The
long-term nature of the agreement allows both sides to better plan and
prioritise, sharing the benefits of savings made."

The contract covers technical support, management of spares, the provision of
plant safety cases and product development capability. It is also another
example of the Rolls-Royce strategy of adding value to customers' operations
across all sectors by developing long-term service agreements.

Notes to Editors

 1. Rolls-Royce is a world leader in marine solutions, providing products,
    service and expertise to more than 20,000 commercial and naval vessels in
    the offshore, merchant, naval and submarines markets. It designs ships and
    its product range includes propulsion systems featuring diesel engines and
    gas turbines, propellers, thrusters and water jets. In addition it provides
    manoeuvring and stabilising systems and deck machinery. About 40 per cent
    of marine turnover comes from aftermarket service support, with a global
    customer support network of sales and service centres in 33 countries.
   
 2. The Rolls-Royce naval business provides products and services to 70 navies
    and coastguards and powers 400 ships. The company is conducting a £137
    million long-term service and support contract for gas turbines which power
    27 ships in service with the Royal Navy, and French, Belgian and Royal
    Netherlands navies, and is part of a team providing support to four Royal
    Australian Navy amphibious and afloat support ships for seven years with
    options for a further five.
   
 3. The contract is formally known as Flotilla Reactor Plant Support. It does
    not include powerplant manufacture.

 4. Rolls-Royce has designed, manufactured and maintained nuclear propulsion
    systems for the Royal Navy for more than 40 years. Its submarine operations are
    based at Derby, where 1,400 people are employed. It also operates the Vulcan
    reactor core research facility in Dounreay, Scotland, on behalf of the Ministry
    of Defence. The business also has teams on site at submarine dockyards in the
    UK.

 5. The Rolls-Royce reactor core design - which will power the Royal Navy's new
    Astute class of submarines - enables a boat to travel for a full operational
    lifespan without the need to refuel, the equivalent of one million miles.

 6. Rolls-Royce plc operates in four global markets - civil aerospace, defence
    aerospace, marine and energy, all with experience in long-term support. Fifty
    per cent of the civil engine fleet is managed under a service contract.
    Services account for more than 50 per cent of the revenues of the defence
    aerospace business and in energy long term service agreements account for 46
    per cent of sales.

 7. For visual material, please go to the Rolls-Royce Media Room, where images
    are available at www.rolls-royce.com/media/gallery/default.jsp
   
For further information please contact

Mark Alflatt
Director - Financial Communications
Rolls-Royce
Tel: [phone]