(Bloomberg) -- Germany is considering re-routing existing subsidies for eliminating coal-fired power plants to help defense manufacturers build new production facilities, according to people familiar with the matter.

The discussions between Germany’s federal government and regional states are aimed at providing the country’s armed forces with more weapons and ammunition and creating jobs in regions that are affected by the shift away from coal, said the people, who asked not to be identified as the talks are confidential.

Germany’s Bundeswehr has been suffering from outdated and partly dysfunctional equipment for years. Following Russia’s invasion of Ukraine the German government last year earmarked 100 billion euros ($109 billion) in defense spending to expand and modernize its armed forces. 

A spokeswoman for the Economy Ministry did not have an immediate comment.

German defense contractor Rheinmetall AG said in December it is expanding ammunition production to ease supply bottlenecks created by the government’s support for Ukraine.

The company will invest more than €10 million in a new production line at its site in Unterluess near Hamburg. The facility is expected to produce ammunition for the 30 “Gepard” self-propelled, anti-aircraft guns which Chancellor Olaf Scholz’s coalition agreed to supply to Ukraine following the Russian invasion.

Separately, Rheinmetall is looking into the construction of an additional factory to produce basic materials and components for ammunition in the eastern state of Saxony which is affected by the coal-exit, one person familiar with the discussions said. The plans are still early stage and could be subject to change.

A Rheinmetall spokesman declined to comment.

--With assistance from Ben Sills.

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