Rolls-Royce said on Monday it had won a contract worth more than 1.0 billion pound (1.24 billion euros, $1.57 billion) to power Britain's next-generation nuclear submarines.

The British power-systems group, which is best known for producing engines for planes, said the contract includes regeneration of the current Rolls-Royce submarine reactor core manufacturing facility in Derby, central England.

"Rolls-Royce, the global power systems company, has signed a contract worth in excess of 1 billion pounds with the Ministry of Defence to deliver reactor cores for the UK's nuclear-powered submarine fleet," Rolls said in a statement.

Defence Secretary Philip Hammond on Sunday said that the new class of submarines would replace the current Vanguard fleet carrying Trident nuclear missiles.

The decision could cause a new rift in Britain's coalition government, with Prime Minister David Cameron's Conservatives in favour of keeping Trident but the Liberal Democrats wanting a cheaper alternative.

"What we're going to be announcing is a commitment to the major refurbishment of the plant at Rolls-Royce in Derby which builds these core reactors, not just for the nuclear deterrent submarines but also for our attack submarines, the Astute class submarines," Hammond told the BBC.

"So this is sustaining a sovereign capability in the UK and some very high-end technical skills in the UK for the next 40 or 50 years."

Hammond was to formally announce the move on Monday.

The Sunday Telegraph newspaper said the Ministry of Defence would fund an 11-year refit of a Rolls-Royce plant that would build two reactor cores, one for the Royal Navy's seventh Astute submarine and the second for a new ballistic missile sub.

Britain has four Vanguard-class submarines designed to carry Trident nuclear missiles. They are expected to be decommissioned in the late 2020s but their missiles will remain operational until 2042.

Hammond last month awarded contracts worth 350 million pounds to British companies to design the next generation submarines, although the final decision on replacements and their numbers will not be taken before 2016.

Hammond also said that a review found that Trident was the "best value solution."

The government has made sweeping defence cuts as part of austerity measures aimed at cutting a record deficit.

The Liberal Democrats want to abandon the so-called "Moscow criterion", which says Britain should have an arsenal capable of destroying the Russian capital, saying it is an expensive relic of the Cold War.