With regards to the US Defence Administration’s possible cancellation of the VH-71 programme, Finmeccanica confirms that this is only the first step in a particularly complex budget approval process and confirms that this will have no financial impact on the Group.
The value of Increment 2 was in fact not included in Finmeccanica’s budget and in multi-year plan. Therefore there are no changes to the guidance provided to the market.
The contract for Increment 1 was received in January 2005 and is worth around USD 3.7 billion (of which approximately USD 1 billion pertaining to Finmeccanica through its subsidiary AgustaWestland). The contract involves the development of nine helicopters (8 already delivered), of which five pilot-production and four test vehicles, and is valid until 2011. Congress has already authorised funding for Increment 1.
The potential cancellation of the programme would entitle Finmeccanica to receive penalty payments that will compensate for the termination of the contract. The contract foresees provisions related to the payment of Termination Fees, which must be defined in accordance with the rules laid out in the Federal Acquisition Regulation.
We believe the potential cancellation of the programme is in no way related to the technical characteristics of the helicopter (whose excellence in performance has never been questioned), nor to the platform cost, which is highly competitive.
The cost increases arising from the customer’s requests for highly specialised systems and on-board equipment might have had an influence on today’s US Department of Defence announcement.