German ministry sees possible delay in signing missile defense contract

LONDON (Reuters) - Germany may not finish negotiations with Europe’s MBDA and Lockheed Martin Corp on the MEADS missile defense system by the end of the year as planned, according to a document sent to lawmakers by a senior German defense ministry official.

The Medium Extended Air Defense System (MEADS) is pictured during a presentation at European Defense Group MBDA in Schrobenhausen, near Ingolstadt, Germany, June 25, 2015. REUTERS/Michaela Rehle

The document, dated July 8 and sent by State Secretary Ralf Brauksiepe, said it was unclear if the project could be submitted to the parliamentary budget committee by the end of this year, or if it would slip into early next year. A copy of the document was seen by Reuters.

Company officials told Reuters last month they hoped to submit a final contract proposal for the Medium Extended Air Defense System (MEADS) by the end of July and wrap up negotiations on the $4.5 billion project by year’s end.

Lockheed officials were not immediately available to comment on the ministry document.

Experts say it may be difficult to win parliamentary approval if negotiations drag on too long too close to Germany’s national elections in September 2017.

Tobias Lindner, a member of the Green party, said the delay made him question if the ministry had fully understood the risks involved in the project.

Germany announced last year it had chosen the MEADS system over Raytheon Co’s Patriot system to replace the current Patriot system fielded in the 1980s, but said the companies had to meet demanding performance milestones to retain the contract.

Germany funded a quarter of the $4 billion invested by it, the United States and Italy to develop the new system as a successor for the Patriot system. The U.S. military, citing financial pressures, decided several years ago not to buy the system, while Italy has not yet announced its plans.

European missile maker MBDA is jointly owned by Airbus Group, Britain’s BAE Systems Plc and Italy’s Leonardo Finmeccanica SpA.

Raytheon, a candidate to build a separate radar system that would be integrated with the MEADS system, says it is staying in close touch with the German government in case the MEADS consortium fails to meet the milestones set by the government.

Reporting by Andrea Shalal and Sabine Siebold; Editing by Paul Simao