Rolls Royce is to embark on a fuel cell venture which will see $100 million spent on fuel cell development.

The project, in collaboration with Singapore-based investors Temasek, will concentrate on developing fuel cells to replace conventional gas turbines in power plants.

Rolls Royce will hold a 75 per cent stake in the fuel cell unit, while Temasek, together with Singapore's economic development board, will own the rest.

The unit, called Rolls Royce Fuel Cell Systems, was set up in January 2003 and will begin offering the fuel cells for commercial use by late 2007 or early 2008, according to Charles Coltman, chief executive of the fuel-cell unit.

"Temasek sees strong commercial potential in the fuel cell being developed by Rolls Royce Fuel Cell Systems,' Tan Suan Swee, managing director of Temasek, said in a statement.

"This technology will be able to generate power more efficiently than a conventional gas turbine or reciprocating engine,' he added.

Rolls-Royce expects its fuel-cell unit to have a "significant' impact on revenue in the middle of the next decade if production begins in the late part of this decade, said the company's chief executive John Rose in Singapore

"The objective is to compete with conventional sources of power and have the benefit of being environmentally friendly," he added.