Saab AB (publ) (SAABB) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Saab Submarine Seminar. I am Amanda Wollstad, and I will be your moderator for today. Today, we will be speaking with Hein van Ameijden, the Managing Director of Damen Naval, who's here to bring light on how Saab and Damen are working with the Walrus Replacement Program, a potential contract of full conventional submarines for the Royal Dutch Navy. We will also be speaking to Andy Keough, Managing Director of Saab Australia and Former Submariner from Royal Australian Navy, who will give us some insight on the strategic value of having submarine capabilities in the Asia Pacific area. Throughout the program, you can ask all our panelists questions either through the form below or through Twitter using the #saabinthesea. But most importantly, here in the cedar you have with me, Lars Tossman, Head of our Business Area Kockums, and the host of today's seminar. Hello, Lars.

Hi, Amanda.

It's good to have you with us. Can you begin by giving us a short update on what has been going on in the last year?

A lot of things happening over the last year here. But if I should mention the big things, the extra contract that we have to the Swedish A26 contract that has been really important for us, of course, and it's a good sign that we got that contract to extend the capability for the A26 submarines. Also that we have started with the initial studies of the upgrade of the Visby Corvettes and also studies on the next generation of Visby Corvettes. So that's sort of 3 things that internally have happened to us at Kockums over the last year.

You have been in your current position for about 1.5 years, what has been the biggest surprise about becoming, as you say, a proud shipbuilder?

I would say the fantastic competence that we have within Kockums. I mean we have a long history with the designing and building submarine and surface ships. And to see the energy, the proudness of both and from the skilled people that develop it and they produce it, and it's a true pleasure walking around in a shipyard to see this. So yes, it's fantastic.

Yes, it's very good to hear. Moving on to the first segment, could you please give us an update on the overall status of the business area? And please join us in the podium.

Thank you. Yes. I will share with you some slides in what is happening at Kockums. As we do think I understand we work both above and below surface with those platforms, the submarines and surface ships. We are designing new vessels, but also important part of our business the maintenance, the support of the platforms. It's a platform that is used for 30 to 50 years. So it's a long life cycle. So it's a fantastic being part of producing it from -- developing from the beginning and then produce it, deliver it and then support it for the whole lifetime. So it's a long-term commitment for a company like ourselves. As you are aware of, we bought Kockums back in 2014. We have now invested a lot to build up the capability, the competence, again, in -- as you see on the right side there, the stealth competence, the shock resistance, the modular design that is very unique for us and the sterling air independent propulsions that is core areas, of course, of utterly importance for the submarines, but also really important for the surface ships. We do a lot of different systems, but I would say the unique thing is our way to handle and put together the system of systems. We have also today recreated a world-class shipyard. We are probably 1 of the most modern shipyard in the world. So I'm really proud of that. That's the journey we have taken on here and where we are today. Submarine. What is it? What does it look like? What are we doing at Kockums now? Well, today, we are busy building, producing the A26. And it's 900 tonnes of secret Swedish steel that have a unique things so that it can handle shock and different environment that you used the submarines in. We built it in 5 sections, 5 super sections. And it's -- we have now 2 halves in the production today. And so now we are busy in populating the platform. We do it in 2 platforms, as you see in the picture here, and that is then put into the hull. And that's a lot of work. And here, you have all the different equipment on board, 140 systems is going to be put together in these 2 platforms. And also a lot of pipes. I mean, when I walk around in the production facility, it's -- it looks like it's billions of different pipes, but it's actually 10,000 unique pipes. Why do it the same? It's fascinating to see the amount of pipes in a submarine. A lot of cables, you see there, 100-kilometer cables is going to be put together, together with 400,000 components and not to mention then the nuts and bolts. So it's an extremely complex platform to build, both design and build. And -- but now we are in a ramp-up phase with, as I said, building, we have 2 hulls in the production hall and busy doing the platform that's going to be put in there later. When all that is ready and we deliver it, this is then going to be the workplace of 26 crew members. And they're going to have this as a living and work in place for a couple of weeks at the time. So it's one of the most advanced platform that you can do and build. So yes, that's what we're busy doing it at Kockums. And I have some snapshots from the -- from our site here. You saw there -- you see here some hulls from the production hall, you see the off section here, picture of that. But we are also busy working with surface ships and autonomous vehicles. And here you see a picture of the combat boat that we had recently in London. And here you see a submarine in its right environment, just add water and that's what we've done here. So yes, this is what it's all about. This is how my workplace is look like. If I take a quick snapshot from what does the market look like? Well, we have around 300 conventional submarines out there in the world between 1,000 and 4,000 tonnes. As a reference, A26 is around 2,000 tonnes, so we are in the middle there. A lot of them are getting old, and we are talking to a lot of nations about both upgrading, but also replacing. So it's a big market out there. And we're going to talk a bit more about some specific cases later on. So yes, with that, thank you.

Thank you for that, Lars. As you mentioned previously, Kockums was recently in the news in Sweden with a big new contract concerning additionals on the A26 program. What does that mean for Kockums?

Well, I would start to say it means a lot for Sweden, of course, adding capability to the already most advanced conventional submarine. So -- and it feels for me as Head of Kockums, fantastic that we had this additional order because it shows the long-term commitment of Sweden and being committed to continue to invest in the underwater field. And of course, it creates a lot of work for our both engineer and production people. So no, it's really important, I would say.

You mentioned a quite large overall world market for submarine capabilities. How large is Saab's potential on the world stage?

Always difficult to say. We have dialogue with quite a few countries, as I mentioned earlier. And the ones that we are most intense in is the Walrus Replacement Campaign in the Netherlands, which we're going to talk a bit more about later. But you also have the upgrade in Australia, the Collins that we were already designer of. And then we have a few other countries that are -- have it in the plans to replace them. So I'm quite optimistic that we -- I think we are well suited for with the position we have now to take on some of those opportunities coming up.

Thank you. And to the audience, don't forget to ask your questions to Lars and our other participants either in the form below or on Twitter using the #saabinthesea. Joining us now from Damen Naval is Hein van Ameijden, who will give us a short summary of Damen's long history and current profile.

Good morning, all of you. My name is Hein van Ameijden. I'm Managing Director of the Damen Naval. Damen Naval is one of the divisions of the Damen Shipyards Group. Damen is the biggest shipbuilder in the Netherlands. We turned out between 150 to 200 vessels a year. And our division is part of it. The division goes back to 1875, when our shipyards in Vlissingen was founded. Let me first start by giving you a small impression of who we are and what we do. [Presentation]

So that is us. And as you've seen, quite a number of young faces that shows that we have been expanding over the past few years. I'd like to say cookery programs, let me show you one that we did before. This is one of a series of light frigates that we built for Indonesia and Mexico. Very nice ships with happy users. The special thing about it is that we built the ships for Indonesia in Indonesia with our partner yard, PT Pal in Surabaya. And the vessel for Mexico was built at the naval dockyard of Salina Cruz using and -- well, cooperating with the Mexican Navy staff. Both very successful, all ships delivered on time and within budget. Then more recent, this is the Nuyina it is the Antarctic research and survey vessel for the Australian government. It's, as we speak, on its way to Hobart, Tasmania. Right now, should you be in Cape Town, you can have a look because she's in the harbor now taking rest. And she will be servicing the stations of Australia in -- on the South Pole and some of the islands in between. We're extremely proud of this ship that was designed and engineered by various divisions of the Damen Shipyards Group. It was built in Romania at our sister yard in Galati and outfitted and tested in trials in Vlissingen. And then last, but certainly not least, the F126 program, maybe that's even more our pride and joy. This program, the biggest program of the German Navy ever was awarded as -- after an open tender, in which all European competition participated, and we won. Having said that, also this ship will be built not in the Netherlands, but in Germany by our partner yards, Lürssen and the German Naval yards, and it will be equipped with German equipments. And in that way, it will be an important step towards an ever closer cooperation between the German and the Dutch Navy. So that's what's keeping us busy at the moment apart from, of course, the preparations on the Walrus program. Thank you.

Thank you, and welcome, Hein. Now that know a bit more about Damen. Can you tell us how come you two are sharing a couch here today? I know Saab and Damen teamed up years ago, but can you tell us how the corporation came to be?

Yes. It's -- it has been a long-term ambition for Damen to reenter the submarine world. We've been building submarines in the past. We are, on a daily basis, with our daughter company, Nevesbu, designing and engineering submarines and parts of submarines. So we do that for a living. But what is missing is a yard where it all comes together. And that's our ambition. Obviously, we had to do that with a partner. And -- we started looking around just at a time that Saab became the new owner of Kockums. And we hit it off immediately. We started talking mid-2014, and a few months later, we had our cooperation agreement, which is based on the cooperation of equals, starting off with, hopefully, the Walrus Replacement Program and then expanding into joint export.

And I would say we complement each other extremely well. We that have the long history with the design and also production, but also Damen with shipbuilding, world-class shipbuilding. So it's a very good complementary relationship that we have, I would say.

Yes. Yes, we're not in competition. That's also makes, let's say, the work sharing a relatively easy thing to do. The Walrus is quite a unique capability. It's a large nonnuclear submarine. Saab has a lot of experience with that. We own the original -- we don't own it, we have the original design of the Walrus. So we know the concept. We know why it looks like it looks. And we combine that with the experience that Saab is currently having with the A26. So that is an enormous derisker for this program. It couldn't be better than this.

How far have you come in integrating the day-to-day processes of the both companies?

Well, I would say, I mean, we interact all the time. People from Kockums are visiting Damen all the time and vice versa, and we are really putting together the proposal to the Dutch Navy in a sort of team-based way. And now, we are really a tight team now working together with...

Yes, we have to be because the guys and girls are permanently locked up in all kinds of secured locations, both in Sweden and in the Netherlands.

Yes.

Can you describe your partnership in a bit more detail? I hear not much have changed since you started out?

Well, I mean, if I put it the simple way, I mean, we have the design capability, which we have in Kockums in Sweden and the shipbuilding is in Damen. So I mean, the main put together the production is going to be in the Netherlands. That's sort of the basics then we have details within that. But the good thing with that apart from it creates works, local work in the Netherlands, but it also -- we are rebuilding the submarine capability in Netherlands. So you can locally maintain support the Navy for the next 30, 40, 50 years with that as well?

Yes, sure. It's all about strategic autonomy. Our customer is very much focused on the capability of maintaining and operating these boats during their lifetime with minimum dependency on foreign sources. And that is also how our way of cooperating forms the basis of that. We should not forget that we don't have currently a submarine integration yard in the Netherlands, so that's the capability disappeared some years ago. But by and large, the supply chain is still intact. And we built periscopes in the Netherlands. We have insulating cladding; battery management, of course, is an important part. So there's a lot to be found.

What you haven't mentioned yet is what you actually offer. Can you tell us a bit more about that?

Well, we are offering the Dutch Navy, the most modern conventional submarine, around 3,000 tonnes, 70-meter long, for long-range use. This is based upon the history, I mean, as I've mentioned previous, we designed the Collins class submarine for Australia and it's about the same size, just 3,000 tonne size. It's based on the technology, the most modern technology that we now put into the A26. And with the modular design that we do in the A26, we are scaling it up to the 3,000-tonne submarine that we are now proposing to the Dutch Navy here. So I would say we have an extremely good offer. And it's derisked as Hein mentioned before because we are already under development production for Sweden with this.

You talked about the Dutch submarine for the Dutch Navy, what exactly do you mean by that?

What we mean is that the Walrus is quite unique in its capabilities within NATO. It's a large submarine, so it can -- it leaves the harbor in Den Helder and a few months later, it's back, and nobody knows what they did in the meantime. And that requires a couple of capabilities in terms of accommodation, endurance of systems, et cetera. And because of the uniqueness of the way the Dutch submarines are operated, it also means that it requires a unique boats. And we are proud to believe that we know a little bit of how to do that.

And what makes this a winning team?

That's up to the customer to decide.

But I think, as mentioned before, the combination of the design capability that we have for decades in Sweden, in Kockums, with a shipbuilding tradition with Damen, we have, as Hein mentioned before, Netherlands have had this capability, and its -- we recreate that, but there is also industries within Netherlands that have it. So I think together, we are, I would say, a dream team, Hein. What do you say?

Well, it would be a little bit precautious to say that of yourself, but we get along well and we trust our products.

Exactly.

If you allow me to get a bit nerdy for a moment? Hein, you mentioned that submarine will leave the Naval Harbor and Den Helder and it will be away for a couple of months, and no one really knows where it goes. When talking about submarine warfare, in general, there are 3 key concepts that is usually highlighted to explain the value of submarines, acting and detected, threshold capacity and force multiplier. These are all major gamechanger for nation. At the same time, there are no service -- a secret as a submarine service. Isn't this something like dilemma for submarine forces around the world and for salesmen of submarines acting and detected being so secret very few, I understand what they're actually good for?

Yes. That is our internal frustration. We would love to put it in the newspapers, see what even the current Walrus class is doing and what it means for other countries, not only for our country, but we can't. So it's a publicity that has to be a secret, and that's a contradiction in terms, I guess. Pity, but we have to live with it.

But I think that the corporation that was announced last week between Australia, United Kingdom and United States, shows the strategic importance of submarine and the strategic -- how you protect your country with this kind of capability. And it's quite a few people in a submarine that gives this threshold. So it's an important asset for a country to have this capability and becoming more and more important. So I think we are well positioned now when more and more countries realize this.

Because the summary in today is really on the way to stay hidden, isn't it?

Indeed.

Yes. And even there, you need to use state-of-the-art technology to keep it like that. So to stay hidden is more and more of a challenge, also a challenge to us.

Yes.

Thank you, Lars and Hein. We'll get back to you two again shortly. And to our viewers, don't forget to ask your questions to Lars and Hein and Andy, who will join us soon either in the form below or using Twitter and the #saabinthesea. During last year's submarine seminar, the Chief of Swedish Royal Navy was on stage to explain the importance of submarine capabilities for the Swedish Defense. She touched on one of the same points, Lars and Hein just made about the importance of submarine capabilities. This year, let's trouble the globe, if remotely, and get a perspective from the other side of the planet. With us is the Managing Director of Saab Australia, Andy Keough. Saab was established in Australia over 30 years ago. It began with the design and build of Australia's Collin class submarine fleet and the transfer of its advanced combat management system capability from Sweden to Australia to support the Royal Australian Navy's surface fleet. Over 3 decades since, Saab Australia has grown substantially and now have nearly 600 employees and have built a trusted and proven relationship with Australia's defense forces. This is a prerecorded segment. Australia is, of course, very far away and for good reasons, we felt safer. But Andy will brave it and join us through link afterwards to answer any questions you may have.

So I had 22 years in the Australian Navy. Most of that was in submarines. I was fortunate enough to command 2 Collins class submarines. I was also fortunate enough to go on exchange with the U.S. Navy in Pearl Harbor Hawaii, where they had the nuclear-powered submarines. After leaving the defense force, I spent 8 years with ASC. We maintain the Collins class submarines. I've also had a range of roles in the industry including defense advocacy and defense industry development. And more recently, I've been here as the Managing Director of Saab Australia, where we've had significant growth within the local business.

Andy your experience would give you a unique perspective on submarines in the Asia Pacific region, can you tell me a bit about the market?

So by the mid-2030s, over half the world's submarines will be located in the Asia Pacific region. It's an area of dynamic change, particularly with the geostrategic environment changing rapidly. And submarines, our primary purpose is around deterrence, protecting a nation's livelihood and national interest.

So clearly, there's considerable investment in submarines in the region, but why submarines, 1 or another defense asset?

So submarines are a unique asset. They're a strategic asset and they're used within most nations to protect and deter attack against their nations. So they've got a significant capability. And despite the onset of drones and other advances, it's going to be many, many years, perhaps even several decades before those 4 capabilities are realized in another asset. So nations look to submarines in times of concern about the changing geostrategic environment in which they exist. There are 2 types generally of submarines. Nations like Australia look to project their submarines at long range from their shorelines. Other nations use their submarines in a more coastal environment to see what's going on in regions nearer to their nation.

Given Australia's role in the region, can it's current submarine capability best protect the nation and its national interests?

So Australia has a unique perspective around submarines. In Australia's environment, we've always used submarines at long range. Going back over 100 years to when Australia first brought submarines in the 1909 period, they were used predominantly straightaway in long-range operations to Papua New Guinea or Timor-Leste far away as The Sea of Marmara over new Turkey. And that's one of the reasons the Collins class was designed with such long range and endurance. It was designed in the '80s, delivered in the '90s and has served us well until now. And recently, the government's announced a life-of-type extension in that submarine over SEK 42 billion to be spent to upgrade that capability to ensure that it remains viable and regionally relevant throughout its life, which ends in around about the mid-2040s, early 2050s.

Andy, last week, Australia, with the United Kingdom and the United States announced a trilateral partnership to significantly strengthen their security and defense cooperation. The first initiative under this partnership is to support Australia in developing nuclear submarines. This has generated much global interest. What does it mean for Australia and the region?

So this is one of the most significant defense announcements in Australia's history. It brings together the old partners of the U.K. with our newer strategic partners of the U.S. together to share very sensitive information and technologies. The first focus, as you pointed to, was the nuclear technology. The pathway for Australia to go from conventional submarines to nuclear submarines is going to be developed over the next 18 months. But it's a unique pathway that Australia is choosing because of our long-range needs and because of our perspective of understanding the broader Asia Pacific region. For many nations, conventional submarines are the most appropriate form of submarine capability that they will need.

In this dynamic environment, what are the business opportunities for Saab? We obviously have a strong and successful track record in Australia.

Well, the Collins class submarines regard is one of the best conventional submarines in the world. And so given the commitment to invest in Collins to upgrade the Collins of over SEK 42 billion, there are significant opportunities here in Australia for Saab. And Saab has had a significant role in the Collins class. We're involved in the design of it, the build of it and a significant involvement throughout its life to date. Leveraging off Sweden's experience with building the A26, the new technologies that they've brought about, the innovation they brought about that, combined with the work they've done on upgrading of the Gotland-class submarines, there are significant opportunities to leverage off the skills and experience that they have and apply that here in Australia, assisting Australia in maintaining its submarine capability throughout the 2050s.

Terrific. Thanks, Andy. It sounds like there's much to unfold for both Saab Australia and the region in the submarine space. We look forward to hearing from you later in the Q&A session. And now back to you, Stockholm.

Thank you for that handover, Madeleine Davis, Head of Communications Saab Australia. Andy now joining us live, welcome.

It's great to be here and greetings from Australia.

You are a former submarine with the Royal Australian Navy. Can you tell us a bit more about your experiences from the field or rather under the sea?

So I had 22 years for the Australian Navy. Most of that was in submarines. Typically, Australian submarines deploy at long range, as I mentioned in my video recording, often away for 6 months at a time and sometimes at sea for over 50 days. So the range as far north as Japan as far east as Hawaii. So long-range deployment. So it's a great experience and wonderful to see the environment and changing environment in the Asia Pacific region. I also finally recall my time in the Netherlands as well. I had 6 months over in the Dutch Navy on the submarines out of Den Helder being trained and taught by Dutch submarine captains. It was a great time and it gave me a great insight to what type of submarines and Navy -- Dutch Navy is after and gave me great insights in respect to the Dutch Navy submariners themselves, and there are incredible capabilities and the amazing work that they do. So that was 1 of my wonderful experiences as well. So it's wonderful to be here with our partners from Damen today.

Today, you are the Head of Saab Australia. Can you tell us a better more about the operation there?

Well, Saab started in Australia over 30 years ago. We won a couple of big contracts here for Combat Systems on a ship and the integrated ship control system on the submarine, which is really the brain that controls the Collins class submarine. So based on the back of those 2 programs, Saab started building up its capability here, transferring technology into the country, hiring up Australians, building up their knowledge and capability from very small beginnings, we now have over 600 people. We've diversified into other areas, including the security domain where we do a lot of security systems with IP that was developed here in Australia. And we're just finishing off the Sydney Opera House at the moment, doing the security system for one of the most iconic and important sites in Australia. We've also exported out of Australia as well. So it shows the whole life cycle from that initial contract winning, tech transfer, building up capability and then using that across in other domains.

Thank you, Andy. Please stay with us. We will be moving into the Q&A session shortly. Don't forget to send in your questions either in the form below or using Twitter and the #saabinthesea. But first, Lars, do you have any concluding remarks for us?

I'm really excited about the future, the possibilities we see here. It's -- we have the great history of Kockums designing submarines for Sweden and produce them and deliver them for a long time. We have the design of the Collins class that Andy mentioned that we now are looking forward to a upgrade program, substantial upgrade. They're going to last for quite a long time after the upgrade. And then together with Hein here, Damen possibility of the Walrus Replacement, where I think we are extremely well positioned. We are a fantastic team together that have a good proposal with all the technology and everything. So no, I'm excited about what we are seeing the future coming on here.

It sounds like there are good times ahead for Saab and Damen both. Let us move on to a few questions from the audience. Starting out with one from Twitter from Anders Svensson and I think this is mostly directed to Lars. When did the project management of A27 need to start to become the most effective in the development of A26? Is continuity important and effective?

Yes, it is. It's -- I mean, first, you develop it, if I simplify it a bit. First, you develop it, then you produce it. But it's a long lead times. So when we are in a full production phase, we need to then -- the engineers need to do things. So of course, we need to start with the next generation, whatever that is called, next-generation submarine for the engineers while we produce the current design. So yes, continuity is of utterly importance, absolutely.

Andy, adding on to that question, how important is the previous experience and presence in Australia?

Well, it's extremely important time. As I mentioned, Collins really set the benchmark for a long-range, highly capable submarines. And so evolving off that and driving off that and improving that to then deliver a solution for Netherlands is an extremely important aspect. So again, submarines take a path of evolution. And so they'll be able to use a lot of the learnings from Australia in that design to evolve into the solution that's provided to the Netherlands.

Please -- thank you, Andy. Please keep sending in your questions either at the form below the stream or Twitter using #saabinthesea. And please remember the hashtag or we won't be able to find them. Hein, can you tell us anything about how the dialogue in the Walrus program is coming along? And what is the next step?

Yes. It's taking a long time. We went through a couple of RFIs, Request For Information. We are with 3 competitors in total. That's no secret. It's TKMS from Germany, it's Naval Group of France and our team. And we are now -- it seems embarking on -- we're in the phase of a competitive dialogue, and we're now entering phase 2a that tells you a little bit of -- that it's a very phased and protracted program. But let's not underestimate the extremely professional job that the team of the Ministry of Defense is doing in evaluating and comparing 3 fundamentally different concepts. So although we would love to start hammering on steel, I think it's best for the project that we are patient and try to provide our customer with the information that they need to make a good decision in the end.

What will be the next step?

Well, as it was announced to us, probably, that's subject to political approval, we're going to Phase 2a, which will be about a couple of aspects like in service support. And what happens after is, well, there's various possibilities. And that will be decided later on. So it can still take a while.

Lars, any comments on that?

No. I mean we are following the process like Hein say, it's a delicate process for any nation to decide upon this kind of capability and platform. So it takes time. It's a -- lot of the considerations, the customers has to do and we, as a supplier, come with different solutions and so on. But the process -- the original intent was that the contracts to be signed late next year, but we'll see if there's going to be delays or if they follow the process and so on, but we are getting in more and more in the final stage now of this process. So yes, that's where we are.

From Xavier Vavasseur, Naval News. The Australian government confirmed the life-of-type extension for the Collins class submarine fleet earlier this month. What do you expect Saab's role would be in this program?

And as Andy mentioned, I mean, we are the original designer of the Collins class, so I foresee our involvement. It was locally built by ASC in Australia. So they produced it. But we are now waiting for sort of formal RFI, RFP, Request For Information, Request For Proposals. So that's the next stage. But of course, we have some dialogue with -- in Australia now on seeing what kind of role. I don't know if Andy would like to comment on it as well?

Well, the life-of-type upgrade is going to be a significant upgrade of those submarines to see them through to the end of service, which will be in the late 2040s. And so therefore, there is a significant amount of design experience and knowledge that you need in order to be able to successfully and efficiently execute that program. And a lot of that work has been previously done with the Gotland upgrade of submarines, cutting submarines in half, replacing sections of the submarine. And some of those skill sets particularly around the modular cans and insertion of capability, they are absolutely unique to Saab. There's very -- no one else in the world that I'm aware of that does that on the breadth and the capability that Saab has got and the currency of those skills. So there's some incredible skills and opportunities that Saab has, has built up over many years, and they're the type of skills and knowledge and experience that will assist Australia in terms of executing that program.

Yes. And it's important that what Andy mentioned, that the recent upgrade of the Gotland-class submarine in Sweden has upgraded 2 out of the 3 submarines with very big upgrades where we, as Andy said, cut them into 2 pieces. We take a lot of equipment and put in a lot of new equipment and a lot of those equipment that are fitted into the Gotland-class submarine today is from the A26. So that's another where we already now risk mitigating the A26, but also coming program. But all this experience will be very important for -- and a skill we bring for the Collins upgrade as well.

Have there been any talk with the Australian government about this yet?

We have some dialogue, of course, and what to do, but we haven't have the formal request for proposal yet, but that's sort of the next step in that process.

Sash Tusa, Agency Partners in London has a question for you as well, Lars. Has the Swedish Navy now committed to a third A26 class submarine? Or is the commitment currently to operate an older Gotland-class boat alongside 2 A26?

We have contract of 2 A26 submarines. So that's what we have. And what the Swedish Navy, if they have plan for more or other things, I think that question is to be asked to them.

And again, from Sash Tusa, the Netherlands Navy's concept of operations and -- sorry, I think I got half the question. We'll move back to Australia in the meantime. Do you have -- while we're on the subject, do you have any comments on what everyone has been speaking about the last couple of weeks, the Akaer's operation and what this could mean for Saab?

Well, it's early days, early days. And as I said before, it shows the strategic importance of submarines this step. But what more impact it will have -- I mean an initial one is that the Collins upgrade for Australia becomes even more important now because it will be -- take a bit longer before they got -- will get their nuclear submarines. So that is an immediate impact on Saab that a bigger upgrade of the Collins than original expected. In the long run, it's not that easy to say. Again, back to Andy, what's your comment around that?

So as I mentioned in my prerecorded introduction, Akaer's is an incredible announcement from Australia. The focus originally is on nuclear submarine technology. And anyone who's been around nuclear is lucky to be on exchange with the U.S. Navy on their submarines, their nuclear-powered submarines for 3 years. And so they gave me great insights to those incredible capability of nuclear submarines, but it is extremely complex and is extremely expensive, and it takes a long time to get right. Countries like U.K., France, U.S., those nuclear powers have been working for many decades and continue to work and drive on that to get it better. So it's going to take Australia a while to do that. And of course, the recognition is right now with this upgrade. The Collins class submarine is going to be the backbone of Australia's national security in the undersea domain for the next at least 20 years, going right out to potentially 2048 on current projections. So we've got to make this successful, this upgrade, and it just highlights again something that was designed in the '80s, delivered in the '90s, is going to serve for a long period of time, be continually upgraded to deliver the best capability to the Australian Navy.

If I may add something from the Dutch perspective. What Andy is saying is indeed the major development from our perspective. And the Collins class and the Walrus are similar in size. So as this major life extension program will take place, it is very easy to imagine that there could be similarities and serious effects on both programs. If we look at similar solutions, technical solutions for both the Collins and the Walrus that could benefit both countries to an enormous extent. But again, here, we are getting a little bit ahead of ourselves, and we have to see how it works out and control our curiosity for the time being.

And we got the rest of the question from Sash Tusa, the Netherlands Navy concept of operations and hence required submarine design, seems very different from the Swedish Navy. What are the challenges of scaling up a submarine design, like A26, Lars?

Well, I wouldn't say it's with a modular concept that we have, as we said before, we design the Collins class, 3,000 tonnes, which is very similar in size to the Walrus Replacement, which also is 3,000 tonne. So I don't see it's more scaling up, and we have that in our -- the basic way we are designing submarines. So no, it's -- that's not sort of a rocket science for us, I would say.

No. And don't forget that I really think that our people understand the way that the current Walrus class is operated and why it looks like it does. And that is know-how that we are feeding into the team and optimizing based on that A26 technology, we create a concept that works for the Netherlands. So it's not just blowing up a A26 to bigger size. It's -- there's more to it than that in terms of accommodation. Accommodation is fundamentally different in the way it's organized. And that's just a simple example. Of course, endurance is different. And so you -- and that concept needs to be balanced. And I think we have succeeded in doing that. Ultimately, it's a customer who is the judge of that.

Thank you. From Richard Scott, James Defense. A26 program has encountered cost and schedule overruns resulting in the recent contract adamants with FMV. In light of this, how do Saab and Damen convince the Netherlands government that the team can manage the program risk and meet demanding cost program targets from Netherlands Walrus Replacement Program?

The add-on contract we had to the A26 is an increased capability, which, of course, has an impact on time schedule and increase the cost for. And that's the choice Sweden made to add-on capability on the existing contract, which I have commented earlier, which is good for us, of course. But I mean, big programs like this, it's always risks involved and that we work constantly with how to set up the mature configuration and the project set up and everything, and that's part of the proposal, how we're going to execute the program. So that's -- it's part of the -- in the dialogue we have with the Dutch Navy, how we're going to execute a program like this, of course. I don't know if...

Yes. I'd like to add something. First of all, the A26 in itself is a derisker to the Walrus program. So all the lessons learned are factored into this new program. Second, I'm proud to say that we deliver our ships on time and within budget without fail. Having said that, the level of predefinition of your scope is necessarily much higher for submarine than for a frigate. With frigate, you can work with reserves, and you don't have that luxury in a submarine. So before you actually start engineering, you need to have a very clear view of what you're doing. And if we and the customer adhere to that principle, all will be fine.

Thank you. Richard Scott, again, what is the status of the discussion with FMV for the midlife update of the third Gotland submarine for a Swedish Navy? When is a contract anticipated?

I think that's a question you have to ask the FMV. I know there are -- there are discussions and there are plans, but it's no decision as far as I'm aware of at least for that. But if that happens, we are happy to take on an order like that, absolutely.

Juan Christensen, New Technique. What upgrades to the Collins class submarines do you think is necessary to keep it relevant till 2040-2050? When did you last upgrade the program?

Sorry, take -- on what program?

Collins class.

The Collins class, oh, Andy, on to you.

Yes. So Collins has been involved throughout its life. As Hein said, you don't just build something put in the water and leave it. There's an ongoing process of development and growth as technology changes, as you manage issues like obsolescence, and so Collins has been going through an upgrade program throughout its life. This life-of-type extension program that the government has announced, the scope of that is yet to be announced. But some of the public statements from defense officials have indicated that major propulsion equipment such as diesels generators, main motors and the propulsion control or power control and distribution system are just some of the items that are under consideration. All of that, of course, is yet to be announced by the government. So -- but there are some of the things that public we were expecting to occur during this upgrade. And upgrading those equipment fits their major equipment, huge amount of technology and capability experiences needed to do that, and they will see the submarine through well into its end of service.

Thank you, Andy. Hein, another feature of the cooperation between Damen and Saab thus has been highlighted, is the European partnership aspect. Why is that so important?

Sorry, I don't -- European partnership of -- between Saab and Damen or...

Yes, 1 feature of the corporation that has been highlighted is European partnership aspect?

Yes, it's -- well, it's more than a European partnership, it's a global partnership. We intend to have a joint export company. Of course, based on the assumption that we will actually win the Walrus Replacement Program. We, as Damen, have 38 shipyards around the world from South Africa to Sweden and from Cuba to China and everything in between. So our network -- our maritime network, also service network, is quite considerable. And I think that, together with Saab, we can benefit from that capability.

Lars, any comments on that?

No, absolutely. I totally agree that we have -- the network is there. The Damen, who is having all these shipyards and everything, yes. It's -- we have all possibilities here. Absolutely.

Thank you so much for joining us. That is, unfortunately, all we have time for today. If your question wasn't answered, and you left your e-mail address, we will get back to you with an answer in writing. Thank you so much, Lars, Hein and Andy, for joining us today.

Thank you, Amanda.

Thank you, Amanda.

Thank you to your audience for all your great questions and for listening in to us. This seminar will be available for viewing on demand shortly. And thank you so much again for joining us for the Annual Saab Submarine Seminar.