Canada, United Technologies Corp revive $4.7 billion Sikorsky helicopter deal

By Nicel Jane Avellana

Jan 04, 2014 02:33 AM EST

Canada said it had agreed with the Sikorsky Aircraft unit of United Technologies Corp to revive a deal worth $4.7 billion or C$5 billion to purchase 28 helicopters, Reuters reported. The agreement, which had been plagued by delays, was nearly scrapped by Ottawa.

The contract for Sikorsky's Cyclone helicopters was signed by Canada in 2004 to replace its Sea Kings fleet which had grown old. However, Ottawa said in September that it could scrap that agreement and look at other options because of the delays and complications encountered by the project. The Conservative government now says it has accepted the report of a third-party recommending a different project model and governance structure.

The renewed agreement with Sikorsky was forged on December 31. That deal will be the basis for formal contract negotiations. For failure to deliver the previous agreement, Sikorsky will be paying Canada $88.6 million in liquidated damages, the report said.

In a statement, Canada's Minister of Public Works and Government Services Diane Finley said, "Under the new terms established in the Principles of Agreement, Sikorsky has committed to deliver the needed helicopter capability at no additional cost to Canada. In addition, the Government of Canada will only issue further payment to Sikorsky upon capability delivery."

Canada will see to it that the helicopters will be delivered with enough capability so it would be able to start retiring its old choppers in two years. Sikorsky will ensure that it will be able to deliver CH 148 Cyclone helicopters that are "fully capable" in 2018.

According to Capital Alpha Securities Analyst Byron Callan, the agreement with Canada was not material for a company as big as United Technologies. However, it would enable Sikorsky to finally put an end to the issue. The report quoted Callan as saying, "It's a Christmas present come late. It allows them a clean slate to start the new year."

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