Austal, Civmec positive on $4bn naval build

Perth companies Austal and Civmec are looking forward to working on the construction of 10 navy vessels at Henderson, but the amount and type of work they will undertake is unclear after the federal government selected Germany's Luerssen as its preferred designer and builder.

The offshore patrol vessel program will be worth $4 billion, including sustainment, with the first two vessels to be assembled by ASC in Adelaide and the remaining 10 at Henderson.

The federal government said Luerssen would use the capabilities of Austal and Civmec to build 10 vessels at Henderson, but provided no details, and added this was subject to the completion of commercial negotiations.

Luerssen said it would be the prime contractor leading a fully Australian build team comprising experienced shipbuilders as directed by the Australian government.

The German group said its Australian team included major subcontractors L3 Australia, SAAB Australia and Penske.

It added that, as part of its commitment to Australian industry content, it had committed to involving Australian SMEs and subcontractors in the project.

“We see vast opportunities for SMEs across the entire country from the shipbuilding program, including in the construction of the vessels, contributing supplies, in shipyard services, in future sustainment work and in supporting industries," the company said in a statement

“What we are proposing fully reflects the national collaborative approach enshrined in the government’s shipbuilding plan and Luerssen’s commitment to developing an Australian sovereign capability.”

During an investor conference call, Austal chief executive David Singleton said he estimated the build part of the contract would be worth $1.5 billion, with work on the first ships in Perth to get under way towards the end of the 2019 financial year.

He was confident Austal would be solely responsible for assembling the ships.

“It certainly won’t be a five for them, five for us or anything like that,” Mr Singleton said.

“The one thing you can almost guarantee there won’t be two companies building ships in parallel in Henderson.

‘I think Civmec have been named because they were an integral part of the Lurssen bid from the beginning, so it just recognises that they’ll continue to be involved in the future.

“We’ve got the advantage because we’re the shipbuilder.

“There’s only one (company) that builds naval vessels along the Henderson strip.”

He said that about 70 per cent of the work on Austal’s existing Pacific patrol boat contract was contracted out for things such as metalwork and shaping, and he expected this contract to work in a similar way.

Civmec said in a release today that it had been selected to play a key role in the construction of the 10 vessels, and underpinned the company’s commitment to building a new $80 million shipbuilding facility in Henderson.

Civmec chairman James Fitzgerald said the company would work with Lurssen over coming months to contribute to the build, touting Civmec’s expertise in manufacturing complex steel structures.

Chamber of Commerce and Industry of WA chief executive Deidre Willmott said about 180 companies worked in the state’s defence industry.

“Today’s announcement is welcome recognition from the government that Western Australia is a national defence leader that is primed to take on future defence opportunities,” she said.

“WA has the capability to make a substantial contribution to the national shipbuilding effort through our superior facilities at Henderson which is strategically located with direct access to the Indian Ocean and HMAS Stirling – the Royal Australian Navy’s largest base.

“Our skilled workforce is also ready to take on all aspects of the OPV contract, from the design and build to future maintenance and sustainment.”

Shares in Austal finished up 9.8 per cent at $1.84 after the company came out of a trading hault following the announcement.