BAE Systems sells patrol vessels to Brazil

Clyde shipyards Two of the vessels were constructed at BAE Systems on the Clyde

BAE Systems has signed a deal with the Brazilian Navy to supply it with three patrol vessels. The contract is worth £133m.

The ocean patrol vessels are already built, having been ordered by the government of Trinidad and Tobago in a contract which was terminated in 2010.

Two of the boats were constructed on the Clyde and the other at Portsmouth.

The new agreement with Brazil will allow vessels of the same class to be made under licence there.

It came 16 months after the Caribbean deal went sour. It is still in arbitration.

The purchase price agreed with the Brazilian Navy is £17m less than the original contract was worth, but BAE Systems said the price was a good one with which the defence giant was "comfortable".

Analysis

This deal is a sign of the times. Those with money to spend are in emerging markets. Not only does Brazil want a modern military to match its new economic stature. It also needs protection for its considerable offshore oil and gas assets.

For naval shipbuilding in Britain (and that's almost all there is left), it carries a sombre warning - that the skills being sought by BAE Systems' customers are not in construction but in design. From South America to Asia, governments have growing military budgets, but they aspire to build their own warships, with the design under licence.

That is the basis on which the next generation of surface fighting ship is being developed. The intention is to make the design adaptable to different requirements and different budgets for weapons systems, in contrast with past Royal Navy designs, which have lacked the flexibility to deliver lower-specification for other customers.

If successful, it means orders for BAE Systems, and jobs for designers and project managers, but it doesn't look so good for shipyard workers on the Clyde or Portsmouth.

The contract is also significant for agreeing to licence the design for building another five of the 90m vessels in Brazil, each weighing 2,200 tonnes and capable of 25 knots.

The South American country is at the start of a major naval renewal programme. With a fast-expanding offshore oil and gas industry, the capability of the 90m ships is seen as important to protecting the country's economic security.

The Brasilia government is also interested in building frigates, and it has been invited by BAE Systems to be a partner in developing the next generation of its warships.

The Ocean Patrol Vessels were originally ordered from Vosper Thorneycroft in 2007, but the company was running late with construction at the time its shipbuilding arm merged with BAE Systems in 2008.

The deal with Trinidad and Tobago was supported with aid from the UK government, as the ships were seen as helpful to intercepting Caribbean drug-runners and in emergency relief operations in the area.

However, the cancellation of the order in September 2010 meant the ships have been berthed at Portsmouth awaiting a sale to another buyer.

Two of them will be delivered to the Brazilian Navy this year and the third is to be fitted out for delivery in 2013.

Andrew Davies, managing director of BAE Systems Maritime division, said: "This is a significant step forward in our relationship with Brazil. The Ocean Patrol Vessels are highly capable ships and I am sure they will be a tremendous asset to the Brazilian Navy.

"We are looking forward to working together and hope this will be the start of a long-term partnership with Brazil in the maritime sector."

Rear Admiral Francisco Deiana, the Brazilian Navy's director of naval engineering, said: "The acquisition will make an important contribution to our ability to provide security and protection to Brazil's jurisdictional waters."

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