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Non-payment leads BAE to terminate Elefsis fast strike craft deal
Richard Scott
BAE Systems Surface Ships has pulled out of a fast strike craft contract with Elefsis Shipyards, citing continued non-payment from the Greek shipbuilding and shiprepair group.
What was VT Shipbuilding International (now subsumed in BAE Systems Surface Ships) signed a contract with the Neorion-owned Elefsis Shipyards in January 2000 as design authority and principal subcontractor for the design, in-country build and integration of an initial three 62 m Roussen-class fast strike craft for the Hellenic Navy. The original GBP175 million deal covered design services, materiel procurement and combat system integration services, plus a parallel programme of technology transfer and facilities development.
Options were subsequently exercised in 2003 (two ships) and 2008 (two ships) for follow-on craft, bringing total class offtake up to seven. However, only the first four vessels have so far been delivered to the Hellenic Navy; the fifth was launched in 2006 but has remained alongside, pending the reinstatement of equipments removed by Hellenic Navy in August 2009 to support standard repairs and maintenance of the in-service vessels. The final pair remain in the assembly hall at Elefsis Shipyards.
In a 3 March statement to , BAE Systems said it "had been forced to terminate its agreements with its industrial partner in Greece, Elefsis, to deliver a series of fast attack craft to the Hellenic Navy.
"The regrettable decision results from continued non-payment of monies owed against its contracts, despite a prolonged period of working closely with Elefsis to help resolve its business issues."
It is understood that payments to BAE Systems have been outstanding for over a year, with the arrears now amounting to EUR27 million. A revised payment schedule had been agreed between the two companies in mid-2010, but BAE Systems sources say that Elefsis advised in November last year that it could no longer adhere to these terms.
BAE Systems sources indicate that the company is ready for discussions with the Greek Ministry of Defence to establish whether a revised framework for completion of the remaining vessels can be agreed.
Termination of the Elefsis contract marks a further setback for BAE Systems' naval export business. This comes after the company's annual results, released in February, revealed that the company had lost GBP163 million (USD265 million) relating to existing contracts for Oman and Trinidad and Tobago, both of which have suffered significant programme delays and cost overruns.
It has additionally taken a GBP100 million charge following the Trinidad and Tobago government's September 2010 decision to cancel its contract for three offshore patrol vessels. BAE Systems says it has challenged the move, and itself issued a termination for default notice on the Trinidad and Tobago government. The parties are now proceeding in accordance with the contract's dispute resolution provisions.
Richard Scott
BAE Systems Surface Ships has pulled out of a fast strike craft contract with Elefsis Shipyards, citing continued non-payment from the Greek shipbuilding and shiprepair group.
What was VT Shipbuilding International (now subsumed in BAE Systems Surface Ships) signed a contract with the Neorion-owned Elefsis Shipyards in January 2000 as design authority and principal subcontractor for the design, in-country build and integration of an initial three 62 m Roussen-class fast strike craft for the Hellenic Navy. The original GBP175 million deal covered design services, materiel procurement and combat system integration services, plus a parallel programme of technology transfer and facilities development.
Options were subsequently exercised in 2003 (two ships) and 2008 (two ships) for follow-on craft, bringing total class offtake up to seven. However, only the first four vessels have so far been delivered to the Hellenic Navy; the fifth was launched in 2006 but has remained alongside, pending the reinstatement of equipments removed by Hellenic Navy in August 2009 to support standard repairs and maintenance of the in-service vessels. The final pair remain in the assembly hall at Elefsis Shipyards.
In a 3 March statement to , BAE Systems said it "had been forced to terminate its agreements with its industrial partner in Greece, Elefsis, to deliver a series of fast attack craft to the Hellenic Navy.
"The regrettable decision results from continued non-payment of monies owed against its contracts, despite a prolonged period of working closely with Elefsis to help resolve its business issues."
It is understood that payments to BAE Systems have been outstanding for over a year, with the arrears now amounting to EUR27 million. A revised payment schedule had been agreed between the two companies in mid-2010, but BAE Systems sources say that Elefsis advised in November last year that it could no longer adhere to these terms.
BAE Systems sources indicate that the company is ready for discussions with the Greek Ministry of Defence to establish whether a revised framework for completion of the remaining vessels can be agreed.
Termination of the Elefsis contract marks a further setback for BAE Systems' naval export business. This comes after the company's annual results, released in February, revealed that the company had lost GBP163 million (USD265 million) relating to existing contracts for Oman and Trinidad and Tobago, both of which have suffered significant programme delays and cost overruns.
It has additionally taken a GBP100 million charge following the Trinidad and Tobago government's September 2010 decision to cancel its contract for three offshore patrol vessels. BAE Systems says it has challenged the move, and itself issued a termination for default notice on the Trinidad and Tobago government. The parties are now proceeding in accordance with the contract's dispute resolution provisions.
