BAE Systems shares jump as Norway picks UK for frigate purchase

Investing.com -- Norway has chosen the United Kingdom to supply new Type 26 frigates in what officials call the largest military acquisition in the country’s history, a deal that sent BAE Systems’ (LON:BAES) stock higher on Monday.

Prime Minister Jonas Gahr Støre announced the decision Sunday, saying the partnership with the UK will provide Norway with the best foundation for meeting defense goals approved by the Storting, the country’s parliament. Deliveries of the frigates are scheduled to begin in 2030.

The selection follows months of evaluation in which Norwegian authorities considered proposals from France, Germany, the United States and the UK. 

Støre said the choice was difficult, with all four allies offering competitive options. He noted that the Chief of Defence had recommended the UK, describing the move as a historic strengthening of defense cooperation.

The agreement will involve joint acquisition of Type 26 frigates for the British and Norwegian navies. The vessels will have matching technical specifications, which officials said will allow shared operations, maintenance and training. 

Defense Minister Tore O. Sandvik said the compatibility will reduce costs and could make it possible for Norwegian and British crews to serve interchangeably. 

The frigates will carry anti-submarine helicopters, though the model has not yet been decided. Authorities are also examining options for unmanned systems.

Norway and the UK are expected to finalize a binding intergovernmental agreement in the near future. 

Once signed, both governments will enter contract talks with BAE Systems, the British prime contractor, to determine price and delivery schedules. Sandvik said the government will then return to the Storting with an investment decision.

The partnership also includes a commitment to industrial cooperation. British authorities have guaranteed collaboration with Norwegian industry equal to the full contract value. 

Støre said Norwegian companies will have a significant role in maintaining and updating the vessels, and both sides have identified possible areas for technological and industrial cooperation.

Officials emphasized that the ships are designed for submarine detection and combat. Each Type 26 frigate weighs 7,600 tons, is 151.4 meters long, has a maximum speed above 26 knots and a range of more than 7,000 nautical miles. 

They will carry a crew of about 166 people with capacity for up to 208. The ships also include cargo space for unmanned vehicles.

Støre said the partnership will improve NATO’s ability to monitor and secure maritime areas in the North, citing the importance of shared security interests with the UK.