Bloomberg: Germany retreats from troubled F126 frigate after delays

Rendering of an F126 frigate
Photo: Bloomberg

Germany said it’s shelving the $10 billion (7.6 billion pounds) purchase of six F126 anti-submarine warships, aborting what stood to be the largest procurement project in the history of the country’s navy, Bloomberg reports.

The government announced that it was pulling out of the program on Wednesday. Instead, the “aim is to purchase a total of eight MEKO frigates — primarily for anti-submarine warfare — as an alternative,” the defense ministry said in a statement, confirming earlier reports on Wednesday of the change.

Rheinmetall slumped as much as 16% in Frankfurt trading, the biggest drop in more than a year, while TKMS surged as much as 12%. Rheinmetall declined to comment.

“The F126 frigate cancellation strips Rheinmetall of the crown jewel that justified the NVL acquisition,” analysts from mwb research wrote in a note.

The F126 project ran into delays and excess costs when Dutch shipbuilder DamenSchelde Naval Shipbuilding BV encountered production problems last year. In an attempt to salvage the plan, the German defense ministry arranged for German shipbuilder Naval Vessels Lürssen to take over as the main contractor last year. The company has since been acquired by Rheinmetall.

The ministry said total financial requirement for the F126 project would have exceeded €18 billion, and changing the prime contractor would have required the government to contractually waive potential claims for damages against the incumbent contractor.

This runs counter to the Ministry of Defence’s understanding of the responsible use of budgetary funds,” the ministry said.

The defense ministry said the procurement for the first four MEKO A-200 frigates would amount to some €6.3 billion, subject to approval by parliament. The option for the four additional ships could be exercised by the end of 2026 for approximately 5.3 billion euros, raising the overall price tag for the eight frigates to 11.6 billion.

A total of more than €2 billion has already been spent on the F126 project since June 2020, according to people familiar with the previous plan, who asked not to be identified discussing confidential deliberations.

The German defense ministry in March signed a preliminary agreement with TKMS to buy at least four MEKOs as a stopgap solution for the F126, and had considered ordering four more.

The shift comes as the German government faces criticism for project selection and how it has allocating its expanded defense budget. It pulled out of the Franco-German fighter jet program FCAS only two weeks ago.

read more in our Telegram-channel https://t.me/The_International_Affairs