Just days before Prime Minister Mark Carney is set to attend two major economic summits in Asia, South Korea’s Hanwha Ocean is shoring up its roster of Canadian partners in a strategic move to win a lucrative contract to replace Canada’s aging submarines.
The federal government needs to replace its four Victoria-class submarines and plans to procure up to 12 new, diesel-electric powered patrol subs. It has already narrowed the field to two contenders: Hanwha and Thyssenkrupp Marine Systems (TKMS), a joint German and Norwegian initiative, with both pitching different economic benefits for Canadians.
Dozens of Canadian partners
“We’re very confident that the Canadian government knows that we have a great submarine,” said Hanwha Global Defense CEO Michael Coulter.
In an interview with CTV News, Coulter says its sub “exceeds all of the requirements” including what he says is the most important one: production speed.
If Hanwha was selected to be the supplier in 2026, Coulter says it could deliver four new subs by 2035 and one vessel each year after that until a dozen are delivered by 2042.
While each submarine will cost about $2 billion to build, the largest part of the procurement deal is in maintaining the vessels over their 30-year life span. Maintenance will add tens of billions of dollars to the contract. Hanwha expects its Canadian partners to benefit from that long term investment, should it win the contract.
Coulter says Hanwha is in discussions with 35 Canadian companies to use their expertise or technology in its submarines, and in its other military equipment as well. As part of its strategy to expand in Canada and compete for other projects, Coulter says Hanwha is aligned with the government’s goal to boost domestic industry.
“It is logical for any government, when looking at a program of this size, to want to create industrial benefit, not just for the defense community, but broader for the Canadian population. We are 100 per cent committed to that.”
Babcock Canada is one of the companies that has signed a memorandum of understanding with Hanwha. CEO Tony March says Babcock currently holds the contract to repair the Victoria-class submarines, and has signed on to provide engineering support and maintenance to the KSS-III fleet, should Hanwha win the deal.
“When you take (a submarine) out of the water and you do tens, if not hundreds of thousands of person hours of maintenance, inspections, repair, and replacement of components that have worn out,” said March.
When asked why Babcock was partnering with Hanwha and not TKMS, March replied that “we’re making commercial decisions based on the environment and based on the information that’s available.”
Carney’s visit
In August, the prime minister visited the TKMS production site in Kiel, Germany but Carney has yet to see in person what Hanwha has to offer.
That opportunity will come when Carney attends the Asia Pacific Economic Cooperation Summit in Gyeongju, South Korea at the end of October. Carney has accepted Hanwha’s invitation for a side trip to take a closer look at the production line for its KSS-III submarine.
Hanwha also points out that is submarines are also currently in use by South Korea. Still at war with North Korea, it’s constantly replenishing its supply chain.
“We have our submarines in service with the Korean Navy. So there are no new startups, no new designs,” said Coulter. “We’re confident in the timeline and very excited to show that capability.”
Canada’s submarines are nearly 40 years old and will become obsolete in about a decade.
The Victoria-class submarines are no longer being made, and it’s difficult for the military to get parts.
Right now, only one of four submarines is operational.
Choosing the sub builder will be the first major decision of the new Defence Investment Agency launched in early October.
In a previous interview with CTV News, the commander of the Royal Canadian Navy, Vice-Admiral Angus Topshee urged the government to decide on a supplier by the end of the year.
The European Pitch
Early next week, the German and Norwegian defence ministers are expected to be on Parliament Hill to make their pitch to the government. There are reports that the backers of TKMS will propose building submarines in Canada as part of their bid.
Hanwha’s bid does not include manufacturing the conventional submarines in Canada.
Coulter says transferring the technology to build the submarines could happen quickly, but building the manufacturing facilities and developing the skilled workforce could delay the replacement schedule.
“Bottom line, it would leave Canada without submarine capability for an extended period of time,” Coulter said.
“We focused our efforts on giving Canada the capability to maintain support and upgrade those submarines in Canada.”
In a statement, Public Service and Procurement Canada says that both “Hanwha Ocean Co., Ltd. and Thyssen Krupp Marine Systems remain qualified suppliers for the Canadian Patrol Submarine Project and their submarine options are being considered. Ensuring timely delivery of the Canadian Patrol Submarine and the best economic outcomes for Canada will be essential.”
PSPC did not say if the parameters would be changed to include a requirement for constructing the vessels in Canada. Because an “active procurement is underway,” no additional details were provided.
