Austal receive $245m for Henderson expansion

Austal has received $245 million government loan to develop infrastructure at the Australian Marine Complex in Henderson to support its landing craft heavy construction program.

The Paddy Gregg-led shipbuilder told the market on Wednesday that the funding, secured from the National Reconstruction Fund Corporation, would be used to construct and fit out additional dedicated shipbuilding facilities for the landing craft program at its Henderson shipyard.

While the cash is via debt, agreements between the federal government and Austal subsidiary Austal Defence Shipbuilding Australia Pty Ltd mean interest expenses and financing fees will be paid by the Commonwealth, minimising working capital requirements on Austal.

Austal chief executive Paddy Gregg said the funding was a great example of the strategic shipbuilding agreement, signed between Austal and the federal government last year, at work.

"(It's an example of) all parties work(ing) together to achieve the best result for this critical build program in Western Australia," he said.

"The funding package underpins the development of facilities to support the efficient build of landing craft heavy, and jobs and economic activity."

Austal was advised by Barrenjoey and Norton Rose Fulbright in the deal.

The project is expected to create an additional 780 WA-based jobs.

The Australian Manufacturing Workers' Union welcomed the announcement, and said it hoped the funding would flow through to secure jobs with fair wages.

"This is exactly the kind of investment we want to see in Western Australia—backing local manufacturing, strengthening our sovereign defence capability and creating hundreds of skilled jobs," AMWU WA secretary Steve McCartney said.

"If the federal government is investing $245 million of taxpayers' money into the construction and fit out of new manufacturing facilities in the Australian Marine Complex, then the workers who will build these vessels must be guaranteed decent wages, secure employment and fair working conditions.

"Public money should be used to lift standards across the industry, not create opportunities for employers to undercut wages and conditions."

The funding comes amid a battle between South Korean conglomerate Hanwha and US investment firm Wildcat Infrastructure for Austal's American operations, which operates major naval yards in Mobile, Alabama, and San Diego, California.

Hanwha—which already holds a 19.9 per cent strategic stake in Austal—lodged an indicative proposal in August valuing the US arm between $US1.05 billion and $US1.20 billion ($1.6 billion to $1.8 billion) on a cash and debt-free basis.

Weeks after Hanwha lodged its bid, Wildcat joined the fray with an indicative offer of up to $US1.35 billion.

The shipbuilder earlier this month announced it had extended Hanwha's due diligence period, with commercial negotiations to convert the initial non-binding offer to a binding transaction having begun.

The company said substantive issues within the due diligence data room had been completed and the core parameters of Hanwha's original offer remain unchanged, though a "tail of lower materiality data requests" remains outstanding.

The same day, the company confirmed it remained in active discussions with Wildcat regarding their bid.

The board's openness to negotiate represents a departure from Austal's historical stance on foreign ownership.

Under founder and former chair John Rothwell, the shipbuilder previously resisted foreign takeover advances, including an earlier whole-of-company pursuit by Hanwha.

Mr Rothwell's retirement from the board and the divestment of his holdings earlier this year cleared the path for the company to explore structural carve-outs of its American operation.

The decision to advance sale negotiations follows operational headaches in the US.

In August, Austal downgraded its FY26 group guidance to an expected loss before interest and tax of $113 million, driven almost entirely by a $175 million non-cash provision inside Austal USA.

The provision was booked after negotiations with the US Department of War and US Navy failed to yield accelerated contractual relief for surging cost overruns on legacy surface vessel contracts, including its towing, salvage and rescue ship and landing craft utility platforms.

While Austal continues to pursue formal legal recovery for those costs, the immediate write-down wiped out a strong $62 million operating profit from its Australasian operations.

Alongside surface ships, Austal USA holds crucial defence work manufacturing electronic desk and command-and-control modules for the US Navy's Virginia-class and Colombia-class nuclear submarine programs through a partnership with General Dynamics Electric Boat.

Austal shares rallied to $4.30 per share following Tuesday's announcement, but are still down from the $6.88 mark they sat at a year ago.