Frigates $370M each for N.Z.

Press, 1 September 1989, Page 1

Frigates $370M each for N.Z.

By

BRENDON BURNS

in Canberra

New Zealand will buy Anzac frigates, if a deal is confirmed, for about $370 million each, including its share of shore support costs.

Sources in Canberra have confirmed the general outline of the agreement reached on Tuesday by the Ministers of Defence and Finance, Messrs Tizard and Caygill with their Australian counterparts. Before the talks, the two Governments were about $2OO million apart. New Zealand was said to have been offered frigates at a sailaway price of about $350 million each.

An extra $l3 million per ship was being put up by New Zealand as its contribution, towards the project costs, including provision of facilities for maintenance, stores and spares. For a four-ship deal, which seems likely over time, this meant New Zealand was offering about $363 million a ship while Australia was seeking about $450 million.

Australia is paying $568 million for each of its eight vessels, including project and support costs. However, Australia was always expected to pay more given the boost to its industry and its keenness to include New Zealand. Government sources in Canberra said it was correct for Australia’s Minister of Defence, Mr Beazley, to have said New Zealand drove an “extremely hard bargain.” The price per ship of about $370 million which is believed to have been negotiated would

mean, for four ships, a total price of $1.48 billion, spread over 15 to 20 years. Mr Tizard said on leaving Canberra that the deal would cost about $lOO million a year. He said that while only two ships were required under the agreement to be signed, there would be an option for another two. Canberra sources said it was virtually inconceivable that having bought two frigates New Zealand would then buy a different vessel to replace its final pair of serving Leander class frigates. Over a 15-year period, unadjusted for the exchange and inflation rate risks which New Zealand would bear, the price for four Anzac ships would be about $1.48 billion. A Deputy Secretary of Defence in Australia, Dr Malcolm Mclntosh, has said that the stiff competition between the two tenderers saw a contract price well below that initially estimated. New Zealand had a working cost of $2.1 billion for four frigates, including support costs, over a 20-year period. The tightly-fought tenders and New Zealand’s determination to hold costs to a minimum, and hot contribute to establishing a shipbuilding industry in Australia, appear to have produced a price about a third less than the original estimate.