Ottawa may divide $44B fleet renewal between Hanwha Ocean-led Korean bid, Germany’s TKMS
Canada is reportedly considering a split award for its massive submarine procurement project, potentially dividing the $44 billion contract between South Korea and Germany. This strategic move aims to secure both cutting-edge naval technology and significant economic investment from the competing bidders.
According to a report in The Globe and Mail, citing senior government sources, the Canadian Patrol Submarine Project (CPSP), which involves the acquisition of up to 12 new diesel-electric submarines to replace Canada’s aging fleet, could be split between a South Korean consortium led by Hanwha Ocean with HD Hyundai Heavy Industries, and Germany’s Thyssenkrupp Marine Systems (TKMS).
The report suggests Canada might order six submarines from each company. TKMS’ Type-212CD submarines could be deployed on Canada’s Atlantic Coast, while Hanwha Ocean’s KSS-III Batch-II submarines would potentially be stationed on the Pacific coast for operations throughout the Indo-Pacific region.
Government sources indicate that Canada will carefully evaluate the bids, considering whether dividing the contract would better serve its economic and defense objectives, before reaching a final decision.
A split contract “would reap industrial benefits from both bidders, including possible investments in this country’s auto industry,” the report stated.
Hanwha Ocean responded that it has not received any proposal regarding a split contract and will abide by the Canadian government’s decision.
“The procurement policy and methods are entirely at the discretion and authority of the Canadian government,” stated a Hanwha Ocean official. “We will proceed according to the government’s announcement.”
The CPSP represents one of Canada’s most significant defense acquisitions in recent history, valued at approximately 60 billion Canadian dollars ($44 billion). Securing the deal would mark the largest single export order in South Korea’s defense industry.
Both companies submitted their final proposals by the Monday deadline, with a decision anticipated as early as June.
Canada is prioritizing not only advanced warships but also substantial industrial investment, making the level of industrial commitment offered by each nation a crucial factor in the final decision.
Initially, Canada sought commitments from South Korea and Germany to establish automobile manufacturing plants in the country – from Hyundai and Volkswagen, respectively. However, media reports suggest that neither country’s proposal includes an offer to build such a facility in Canada.
Instead, Hyundai Motor has proposed developing hydrogen fuel-cell infrastructure in Canada as part of its bid, according to Hanwha Defense Canada CEO Glenn Copeland in a recent Bloomberg interview.
The Hanwha Group has also signed several memorandums of understanding with Canadian companies across various sectors, including steel, artificial intelligence, and space technologies, pledging investments and job creation should it win the contract. These include a 345 million Canadian dollar investment in Algoma Steel to construct a new steel beam mill in northern Ontario, as well as plans for establishing a shipbuilding training center.
The South Korean government has increased its efforts to support the bid, effectively transforming it into a government-to-government agreement. Seoul dispatched a high-level delegation to Canada in January, led by presidential chief of staff Kang Hoon-sik, along with executives from major shipbuilders and other companies. Industry Minister Kim Jung-kwan is also scheduled to visit Canada on Thursday to meet with Canadian officials and further support the bid.
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