Austal chief executive officer Paddy Gregg alongside a company-built US warship. Credit: Supplied
Austal will become the WA shipbuilder of choice for the Department of Defence under a heads of agreement announced by the Federal Government that stands to provide certainty to the State’s biggest shipyard.
Subject to finalisation, the “strategic shipbuilding” deal would see Austal build up to $1 billion of landing craft for the Australian Army at its Henderson shipyard, guaranteeing jobs and the medium-term future of the facility.
It will also consolidate WA shipbuilding at Henderson, better positioning the shipyard to bid for more and bigger work.
“This initiative will deliver a secure pipeline of work at Henderson, providing industry with greater certainty and helping to secure long-term skilled jobs, infrastructure investment and productivity in the local economy,” the Government said.
The news was accompanied by the awarding of contracts to Austal to build two new Evolved Cape-Class patrol boats for the Royal Australian Navy at a cost of $157.1 million.
That work will secure Austal’s 400-strong workforce, avoiding the need for more layoffs by the ASX-listed group, until the landing craft contracts are confirmed.
The Government estimates that hundreds of more skilled jobs will be needed to build potentially dozens of landing craft across two heavy and medium classes.
Subject to a finalised agreement, Austal would build 18 500-tonne medium landing craft at Henderson to an existing design used by US group Birdon. It is also in line to build the heavier class of 3000-tonne vessels, the design of which has still to be revealed.
The company’s shares were nearly 5 per cent higher at $1.955 as at 11.30am.
Austal chief executive Paddy Gregg said Thursday’s announcement was “as good as we could have hoped for”.
“This strategic shipbuilding agreement really tries to address continuous naval shipbuilding in a way that governments have talked about but never delivered on,” Mr Gregg said.
So I think that really helps, we can recruit people telling them they can have a career, rather than then coming come here and building a project hoping that more projects come.”
While Austal has built dozens of warships for the US Navy under long-running contracts focused on its shipyard in Mobile, Alabama, with defence work at the foundation yard at Henderson largely limited to patrol boats for the RAN and regional navies.
However, the Government’s Defence Strategic Review, released in April, has opened up opportunities for Austal and Henderson to win a share of tens of billions of dollars in expected new construction work as Australia reassesses naval defence.
Earlier this month, Austal revealed it was partnering with construction group Civmec and Spanish shipbuilder Navantia in a billion-dollar bid to build a new generation of warships in WA for the Royal Australian Navy.
The trio are pitching for smaller surface vessels expected to be ordered by the RAN in the wake of the defence review.
The partnership is offering six “Tasman class” corvettes based on a design “referencing” Navantia’s Avante class of 99m-long corvettes. They would be built at Austal and Civmec’s existing facilities in Henderson, south of Perth.
The proposal, and others by shipbuilding rivals chasing RAN contracts, is a nod to the growing trend by navies towards more smaller vessels over larger combatants.
The naval vessels would still be the biggest built at Henderson.
Mr Gregg said on Thursday that the heads of agreement built on the defence review’s blueprint to establish Henderson as a major shipbuilding hub.
It “is the first step to enliven that blueprint and further develop a world-class sovereign naval shipbuilding hub that has capacity to build capability faster”.
ASB Price at posting:
$1.93 Sentiment: None Disclosure: Held
(20min delay)