OPV dispute settled, but at what price?

The following article whose content is pasted after my preamble was taken from the Financial Times

Carola Hoyos gives an update on the OPV dispute and some of its background. You will remember that on October 28th the Trinidad Guardian reported that the AG had requested 1.3 billion dollars.

It is believed that the additional money, requested just barely a month after the 2013 Budget had been read was to settle the BAE OPV matter. It is believed too that the $5b that Warner was allocated in his national Security budget was also meant to be used to cover the OPV settlement.

November 14, 2012 9:46 am

BAE settles dispute with Trinidad

By Carola Hoyos

BAE Systems on Wednesday reached a settlement in its long-running dispute with Trinidad and Tobago over a cancelled offshore patrol boat order.

The settlement brings to a conclusion a disagreement that arose when Trinidad cancelled an order for the three boats following cost overruns and delays. The decision in 2010 came so late in the development phase of the contract that one of the three boats was ready to be delivered, prompting BAE to take a £100m charge.

Last year BAE was able to sell the boats to Brazil, tapping a new, lucrative naval market in a country looking to expand its defence presence, especially on its oil-rich coast line.

Even so, the settlement will come as a relief to BAE, which has been under pressure from investors since its planned tie-up with EADS was scuppered by political wrangling.

BAE said the settlement was “at an amount consistent with provisions held”.

Robert Stallard, analyst at RBC, said the deal should be seen as a positive development because it reduced the company’s political risk. He noted that by 2012 BAE had received about £130m as a working capital inflow from Brazil and had carried a trade liability of £125m in deferred income relative to the settlement.

“Today’s settlement is likely to be for £125m-£130m. There should be a net nil result in the working capital for the year as we understand Brazil has already paid for the ships,” he said in a note.

In 2009 BAE bought VT Group’s naval shipbuilding business after having formed a joint venture with the group. With it, BAE inherited a contract with Trinidad and Tobago, in which the government agreed to buy three offshore patrol vessels for £155m.

The order came in 2007 as BAE was finalising the joint venture with VT, combining the Portsmouth yard with those of BAE on the Clyde in Glasgow. At the time, the UK Ministry of Defence was pushing for such consolidation ahead of the expected drop in ship building orders. Now, with that decrease having materialised, BAE is reviewing whether it should close one of its yards.

The deal with Trinidad and Tobago went sour in 2010 after a new Trinidadian government said the boats were not built to their specification. However, Trinidad agreed BAE could begin to market the vessels to other countries, which it did successfully, finding Brazil as a buyer in 2011.

 

I guess we goodly citizens have to wait to hear what the final figure is. Listen for the spin that will somehow make this the PNM's fault, because we know it's not the Government's and certainly not the AG's fault.

 

De Vice Cyah Done!