UPDATE 2-United Technologies, Canada reach deal on delayed helicopters

Wed Jun 18, 2014 8:21pm EDT

(Adds interview with Sikorksy president, byline)

By Andrea Shalal

WASHINGTON, June 18 (Reuters) - United Technologies Corp on Wednesday said its Sikorsky Aircraft unit would record sales of $850 million and a charge of $440 million in the second quarter after signing a revamped agreement with Canada for 28 maritime helicopters.

The amendment to the long delayed multibillion dollar deal will allow Canada to start retiring its fleet of aging Sea King helicopters in 2015 and accelerate operations of the new CH-148 Cyclone helicopters, the company said in a statement.

It said the charge would be offset by one-time gains during the course of 2014, and the company's forecast for earnings per share in 2014 remained unchanged at $6.65 to $6.85.

"This agreement clears the way for us to deliver the world's most advanced maritime helicopter capability to the Royal Canadian Air Force," Sikorsky President Mick Maurer said in a statement.

Public Works and Government Services Canada, which oversees defense procurements, said the government's budget of C$1.9 billion the helicopters remained unchanged, and it would spend C$5.7 billion for in-service support of the new fleet through 2038, 10 years longer than planned.

"I am pleased that this contract has now been completed and that we can fulfill our government's commitment to begin to retire the Sea Kings in 2015, and deliver a new and leading maritime helicopter to the Royal Canadian Air Force," said Diane Finley, minister of public works and government services.

Canada announced in September that it might scrap the deal and consider other options, but the two sides reached agreement in late December on how to revamp the contract.

On Wednesday, Canada said Hitachi Consulting, an independent group that reviewed and verified the new contract structure, would continue to oversee aspects of the implementation plan, ensuring that delivery times remain as promised.

Maurer told Reuters in a telephone interview that the deal removed a cloud of uncertainty that had been hanging over the program and could revive interest from other countries in the new helicopters, which are based on Sikorsky's S-92 helicopter.

He said he expected interest to pick up once Canada began operating the new advanced helicopters, which can be used for a variety of missions, including hunting enemy submarines.

Canada is already using four helicopters to train pilots and technicians. At least six more helicopters would be delivered as part of an initial block by the middle of 2015, Maurer said.

By the middle of 2018, Sikorsky would deliver at least six more helicopters with further mission and software capabilities, as well as improved components that would reduce operating costs.

Maurer said the new contract adopted a more phased approach for introduction of the new helicopters, a change from how the program was initially structured.

"What we're going to be able to do it give them incremental improvement, with one block in 2015 and a second block in 2018 that gives them full capability over time," he said. (Additional reporting by Randall Palmer in Ottawa; Editing by Andre Grenon and Cynthia Osterman)

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