Austal set to win more US Navy contracts

Henderson-based shipbuilder Austal has taken a step towards a long mooted defence contract after the US Navy exercised an option to fund the purchase of long lead time equipment for two additional vessels, valued collectively at $450 million.

The equipment, including water jets, diesel engines and reduction gearboxes, will be used for the construction of two additional 103 metre Joint High Speed Vessels (JHSV).

Today's award is valued at $125 million.

Austal's contract with the US Navy includes options for nine additional vessels to be awarded between fiscal 2009 and fiscal 2013.

Each vessel is valued at around $225 million, with the potential 10-vessel project worth about $2.3 billion.

Austal has already been awarded the construction contract for the first JHSV, with construction to start later this year.

Today's announcement comes on the back of bad news for the shipbuilder late last week, as it advised shareholders it could take a bigger than expected hit after one of its US customers, Hawaii Superferry, filed for Chapter 11 bankruptcy protection earlier this month.

Austal had previously said it was highly likely it would get its money back after it loaned Hawaii Superferry $US21.3 million as part of a deal also consisting of two high-speed vessels.

However, last week Austal said it is unlikely there will be sufficient funds from the sale of the vessels to recover its loan.

Austal had made a $US5 million provision for doubtful debts against the loan in its interim report, however that will increase by a further $US18 million.

The company reassured investors it will be able to pay a dividend for the year as the repayment of the loan was not due before 2013 and hence will not impact short-term cash flow.

Today's announcement is below:

The US Navy has exercised contract options funding Austal's acquisition of long lead-time equipment associated with the construction of two additional 103 metre Joint High Speed Vessels (JHSV).

The award is valued at almost AUD $125 million.

Austal was awarded the initial contract to design and build the first 103 metre JHSV in November 2008.

The contract included options for nine additional vessels to be awarded between FY09 and FY13.

Each JHSV is valued at approximately AUD $225 million, with the potential 10-vessel program valued at approximately AUD $2.3 billion.

Austal CEO and Managing Director Bob Browning said; "This request confirms the Department of Defense's public support of this very important vessel program and is a clear signal that options 2 and 3 will be taken up," Mr Browning said.

Long lead-time material for the additional vessels will include diesel engines, water jets and reduction gearboxes.

Similar to the Austal-built "WestPac Express" operated by the US Marines for the past seven years, the JHSV will be capable of transporting troops and their equipment, supporting humanitarian relief efforts, operating in shallow waters and reaching speeds in excess of 35 knots fully loaded. The vessels will be a joint-use platform operated by both the United States Army and Navy.

Construction of the first JHSV is scheduled to commence at Austal's US shipyard in November.