France’s Naval Group and Italy’s Fincantieri Secure Defense Contracts in Indonesia

May 2024

France’s Naval Group, in partnership with Indonesian shipbuilder PT PAL, has won a contract from the Indonesian government to build two Scorpene Evolved diesel-electric submarines (SSKs) equipped with lithium-ion batteries. The contract involves building the submarines entirely at PT PAL’s facilities in Surabaya. Each submarine will be 72 meters long, displacing between 1,600 and 2,000 tons. They will accommodate a crew of 31 and carry up to 18 weapons. These submarines, equipped with six torpedo tubes, can reach submerged speeds of over 20 knots and dive up to 300 meters.

Naval Group, in cooperation with the French government’s Directorate General of the Treasury, will secure funding for the submarine program through multiple loan sources. These include a credit facility from France’s Banque Publique d’Investissement and a direct loan from the Directorate General of the Treasury, covering up to 85% of Naval Group’s share of the contract. The remaining 15% of Naval Group’s share and up to 100% of PT PAL’s share will be financed through additional loans arranged with a private commercial lender.

Construction of the first submarine is slated to commence 14 months after the contract is finalized, contingent upon securing funding sources and receiving an initial payment. This timeline ensures all financial arrangements are in place before work begins.

In another significant development, an Italian shipbuilding company, Fincantieri, has partnered with the Indonesian Ministry of Defense in a landmark agreement valued at EUR 1.18 billion (USD 1.27 billion) to acquire two advanced PPA Units. The PPA, or Multipurpose Offshore Patrol Ship, is a vessel known for its advanced versatility and features. These ships can perform a wide range of tasks, including patrols, search and rescue operations, civil protection missions, and frontline combat.

Under the agreement, Fincantieri will act as the main contractor, coordinating several industry partners, including Leonardo, to tailor combat systems and offer extensive logistical support. This partnership will follow strict regulatory guidelines for transactions between related entities, ensuring transparency and compliance.

The advanced PPA vessels will potently deter new security challenges and safeguard crucial maritime interests. Their capabilities to operate high-speed vessels, engage in humanitarian missions, and assist in civil protection mark a significant advancement in marine defense.

(Sources: Janes; and Indonesia Business Post)

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