Patrick Durrant & Katherine Ziesing | Sydney & Canberra
The Federal Government will retain ownership of submarine and ship builder and sustainer ASC with its full separation into three disparate entities to be completed in 2017.
In a joint statement, Ministers Cormann, Payne and Pyne, representing the Finance and Defence ministries, said this would ensure ASC was "best placed to support the future needs of Australia’s future shipbuilding capability".
Three new companies will be formed, namely: Shipbuilding; Submarine Sustainment; and Infrastructure.
According to the Government, the separation of ASC will deliver "a more flexible approach to managing the investment required in shipbuilding infrastructure to support the Government’s historic continuous shipbuilding program".
"The Government does not have a plan to privatise these three new companies."
The creation of these three new companies follows a strategic review of ASC, which was conducted in 2015. The review sought to identify the best possible corporate, capital and governance arrangements to help maximise the future success of ASC and the Australian naval shipbuilding industry.
The Government does not have a plan to privatise any of these three new companies.
Responding to questions regarding infrastructure at a joint press conference hosted by the three Ministers and the PM Malcolm Turnbull, Defence Industry Minister Christopher Pyne said it was the Government's intent to own the entire area at Osborne South and North.
"To that end, we will be negotiating with the South Australian Government to take over their Techport common user facility as part of their contribution to the future of naval shipbuilding industry in South Australia and so that infrastructure will be part of that business."
Finance Minister Cormann was explicit in his response to questions regarding future ownership of infrastructure by future submarine builder DCNS, an option in which the company has expressed interest.
"No, the Government is very clear," he said. "This is a strategic asset of national significance and it is explicitly the Government’s intention to maintain the infrastructure business and infrastructure assets in Commonwealth ownership."
The precise nature of the corporate structures and governance arrangements will become clearer in the coming months and have regard to future decisions regarding the shipbuilding industry models and infrastructure requirements. In the interim, the current Board of ASC will continue across the separated entities, under the leadership of the ASC Chair, Bruce Carter.
In February this year at ADM's Congress in Canberra, former Austal CEO Andrew Bellamy singled out ASC as the single largest impediment to the necessary consolidation of the naval shipbuilding industry.
As a member of the naval shipbuilding panel convened at the event, Bellamy said, "the private sector can't compete against the Government for Government contracts – it's not a level playing field. So if you're a free market person then the first thing you have to do is move the ASC out of Government control".
ADM Comment:
The government has at last put to rest the latest round of rumours that ASC, in any form, will be sold off to a private company. Until the next review that is.
The maritime industry is still awaiting the much-anticipated national shipbuilding plan that will put flesh on the bones of the announcements made by former Prime Minister Tony Abbott and when and where the OPV and Future Frigates will be built.
There are differing schools of thought on how the national industry will be shaped by this plan, with consolidations across the nation no surprise to anyone in the debate.
With material to be cut for the OPVs in 2018, a decision on a preferred tenderer will have to be made in the coming six months if that schedule is to be kept. The current model of building the first two ships in Adelaide and then ‘moving west’ for the remainder of the program is still under negotiation at a government level as part of the national shipbuilding plan development ADM understands.
Similarly, the ambitious schedule for the Future Frigate cutting steel in 2020 means that this program will also have to have significant movement in the coming 12 months.
Both programs are being considered under a competitive evaluation process (CEP) but both industry and Defence sources say the processes only share a name in how they are being managed.
ADM has questioned how a CEP can choose a design partner for the Future Submarine in barely a year and yet the respective CEPs for OPV and Frigates are taking much longer. Answers from Defence officials in this space have been less than forthcoming in explaining the rationale behind their thinking besides confirming that much more work had been done in the submarine space before the CEP came into play compared to the other platforms.
Regardless, it is good to see a measure of certainty around ASC and its future as a government owned entity as the nation enters a potential gold age of shipbuilding programs.