BAE Systems, Fincantieri, Navantia In Australian $31 Billion Naval Modernization Program

Australia has shortlisted three European companies as part of its AUD 40 billion (US $31 billion) naval modernization program.

UK based BAE Systems, Italy’s Fincantieri and Spanish Navantia had been asked to refine designs for nine new frigates to be built for AUD 35 billion, Wall street Journal reported Monday.

Prime Minister Malcolm Turnbull was quoted as saying that Western Australian shipbuilder Austal Ltd. (ASB.AU), which builds Littoral Combat Ships for the US Navy, had won a separate A$900 million contract to build smaller patrol boats for tiny Pacific islands nations.

"These three projects will ensure Australia retains a sovereign capability to build and sustain its naval vessels," Turnbull said. "Together they represent close to AUD 40 billion worth of investment in Australia's future naval capabilities and our naval shipbuilding industry."

The government is under pressure to use Australian steel as much as possible for construction of the warships, as well as a new A$50 billion fleet of 12 advanced diesel-electric submarines for which a tender decision is also looming. Firms from Japan, Germany and France are competing to build the submarines in one of the world's most lucrative current defense contracts.

Senior security ministers were to meet this week to look at submarine tender recommendations from the military, which has been spared Budget cuts as Canberra looks to hedge against China's increasing military muscle on key trade routes passing through the South China Sea.

BAE Systems has been asked to refine its Type 26 Frigate design being developed for the U.K.'s Royal Navy, Turnbull said. Italy's Fincantieri--owned by the Italian state through Fintecna--would supply its FREMM Frigate design, versions of which have been chosen for the French and Italian navies.

Spain's state-owned Navantia--already chosen by Australia around a decade ago for construction of three missile destroyers--had been asked to use the same F100 ship as the basis for a modified frigate proposal. Construction would start in 2020, the government said.