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Australia earmarks billions for naval infrastructure as BAE wins AUKUS submarine work

Published 03/21/2024, 07:33 AM
Updated 03/21/2024, 11:22 PM
© Reuters. FILE PHOTO: U.S. President Joe Biden, Australian Prime Minister Anthony Albanese and British Prime Minister Rishi Sunak deliver remarks on the Australia - United Kingdom - U.S. (AUKUS) partnership, after a trilateral meeting, at Naval Base Point Loma in S
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By Lewis Jackson

SYDNEY (Reuters) - Australia said Thursday it would spend billions on docks, shipyards and factories at home and in Britain for nuclear-powered submarines under the AUKUS security pact, and named Britain's BAE Systems (LON:BAES) to help build the boats.

The AUKUS agreement among Australia, Britain and the United States will see Australia buy up to five nuclear submarines from Washington in the early 2030s before jointly building and operating a new class, SSN-AUKUS, with Britain, roughly a decade later.

The pact, which will see Australia become the seventh nation to operate nuclear-powered submarines, will stress shipyards in Britain and the United States that are already beset by delays and cost overruns.

To help alleviate the strain, Australia will give Britain 2.4 billion pounds ($3.1 billion) toward design work on the conventionally armed SSN-AUKUS and expanding a Rolls-Royce (OTC:RYCEY) plant that builds nuclear reactors for submarines.

Australia has already agreed to invest $3 billion in U.S. shipyards, which build the Virginia-class nuclear submarines it will be sold early next decade amid concerns that a backlog of orders could jeopardize the deal.

"What AUKUS is doing is allowing Australian industry to further invest here, but there are opportunities also opening up with our UK and US partners," Defence Minister Richard Marles said in a statement on Thursday.

Australia will also invest A$1.5 billion ($993 million) to prepare a naval base in Western Australia for nuclear submarines, in particular a U.S. and British force set to be based there part of each year starting in 2027. The total cost of the work is expected to be about A$8 billion.

The Australian and British foreign and defence ministers will officially launch the investments on Friday at a joint news conference at shipyards in South Australia, where Australia will build its AUKUS fleet.

Australia said BAE Systems had been selected to build the submarines in South Australia in partnership with local naval firm ASC.

Work is expected to start in the late 2020s, after at least A$2 billion worth of new shipbuilding facilities are completed.

Once the submarines are in the water, ASC will handle maintenance and logistics. The firm, which builds and maintains Australia's diesel-powered Collins-class fleet, will work with unspecified U.S. and British companies.

SSN-AUKUS submarines will also be built in Britain, and BAE won a 4 billion pound ($5.1 billion) contract in October 2023 to start design work and infrastructure at the shipyard at Barrow-in-Furness.

Nuclear submarines require a specialised workforce and BAE and ASC will set up a joint skills centre in South Australia to begin training workers.

Australia plans to send roughly 100 ASC workers to Pearl Harbor, Hawaii, next year to train at the U.S. naval facility there.

© Reuters. Australian Deputy Prime Minister and Minister for Defence Richard Marles and British Defence Secretary Grant Shapp attend a press conference at Parliament House, in Canberra, Australia, March 21, 2024. Jay Cronan/Australian Department of Defence/Handout via REUTERS

($1 = 0.7816 pounds)

($1 = 1.5110 Australian dollars)

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