UPDATE 2-Canada says back on track to buy Sikorsky helicopters

Fri Jan 3, 2014 5:50pm EST
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By Louise Egan

OTTAWA Jan 3 (Reuters) - Canada has reached an agreement with United Technologies Corp's Sikorsky Aircraft unit to reactivate a C$5 billion ($4.7 billion) deal to buy 28 helicopters that had been beset by delays and was almost scrapped by Ottawa.

Canada signed a contract in 2004 for Sikorsky's Cyclone helicopters to replace its ageing fleet of Sea Kings. But after delays and complications, Ottawa announced last September that it might scrap the deal and consider other options.

The Conservative government now says it has accepted the recommendations of a third-party report for a different project model and governance structure.

It reached an agreement with Sikorsky on Dec. 31, which will form the basis for formal contract negotiations. Sikorsky also agreed to pay Canada $88.6 million in liquidated damages for non-delivery.

"Under the new terms established in the Principles of Agreement, Sikorsky has committed to deliver the needed helicopter capability at no additional cost to Canada," Diane Finley, Canada's minister of public works and government services, said in a statement.

"In addition, the Government of Canada will only issue further payment to Sikorsky upon capability delivery," she said.

Canada will see delivery of helicopters with enough capability to allow the government to begin retiring its old helicopters in 2015. Sikorsky will enhance those capabilities to produce "fully capable" CH 148 Cyclone helicopters in 2018.   Continued...