We told you last week that Lotus Racing was seeking to use Renault engines, and a deal has been agreed in principal, with the former’s three-year engine supply contract with Cosworth being the only hurdle. Well, it looks good now as Cosworth has announced that it will set Lotus free from the contract!

“Cosworth has reached an agreement in principle with Lotus Racing whereby the team’s Cosworth engine supply agreement will come to a conclusion at the end of the current Formula 1 season,” Cosworth said in a statement last night. “This agreement is subject to contract and until the agreement is signed, neither party will be making any further comment.”

With the termination of the deal with Cosworth, Lotus will be free to procure engines, gearboxes and transmissions from Renault, which also powers championship contenders Red Bull Racing.

In yesterday’s Italian GP, Heikki Kovalainen finished 18th while Jarno Trulli recorded a DNF thanks to yet another gearbox failure on lap 46. Fernando Alonso won the race in his first time driving for Ferrari at Monza, followed by McLaren’s Jenson Button and teammate Felipe Massa. Read our race report here.

On another note, Autosport reports that Lotus Racing will race under the classic Team Lotus name starting next year. This is after team boss Tony Fernandes purchased rights to use the name from former owner David Hunt. The announcement will come during the Singapore GP, it adds.