Rolls-Royce, BAE and Babcock should see some revenue potential from Monday’s AUKUS deal, according to Jefferies.
The AUKUS is a trilateral security pact between Australia, UK and the US where the UK and US will assist Australia in acquiring nuclear-powered submarines.
On Monday, it was announced Australia will join the UK’s SSN submarine programme and purchase three second-hand Virginia submarines from the US, with the option for two more.
While official announcements are scarce, BAE will be the prime manufacturer of the UK’s SSN and Jefferies attributes a “high probability” it will manufacture Australia’s too, meaning it will take the largest share of the total program value which is worth up to A$368bn.
Rolls-Royce, on the other hand, will provide the nuclear propulsion systems for all SSNs, while Babcock is the through-life support partner for all UK nuclear submarine activity.
Babcock is expected to be involved in the design planning and training for the SSN program, although nothing has officially been announced.
BAE is expected to capture 20% of the total program value, Babcock could capture 1% and Rolls-Royce 4%, although Jefferies notes this could be a conservative estimate