Self‐dual Einstein spaces are shown to admit an infinite hierarchy of conservation laws, and this hierarchy is then used to derive a formal version of Penrose’s twistor construction. The set of formal holomorphic bundles of fiber dimension 2 over the Riemann sphereP1 is shown to form a formal infinite group which is used to derive nonlinear superposition principles. As an example of our methods a new self‐dual Einstein space is obtained as the result of a ‘‘collision’’ of complexpp‐waves ‘‘traveling in opposite directions.’’