Defence Business: CEA Technologies prepares for export push
By Gregor Ferguson
A Canberra-based company has succeeded against the odds in developing world-class radar products from its own R&D and selling them both to the ADF and in a demanding and traditionally sceptical export market.
Canberra-based radar manufacturer CEA Technologies Pty Limited is positioning itself to pursue an emerging global market for active phased array radars, with an initial focus on naval customers.
A key partner on the global stage will be Northrop Grumman's Baltimore-based Electronic Systems Sector which acquired a 49 per cent stake in the company for an undisclosed sum in March 2006.
The company is finalising contract negotiations with the Defence Materiel Organisation (DMO), to equip the RAN's eight ANZAC-class frigates with CEAFAR and CEAMOUNT active phased array radars as part of the service's $516 million Anti-Ship Missile Defence (ASMD) upgrade program.
And the company is working under a $21 million R&D contract from the DMO to develop new, high-power active phased array radar technology under the joint US-Australia AUSPAR radar research program which was launched in 2005.
The Anzac-class frigate contract is expected to be signed in the second quarter of 2007, CEA Technologies' CEO, Mike Aitchison, told ADM.
He wouldn't disclose the anticipated contract value prior to signature but analysts expect it will be greater than $100 million, with first deliveries scheduled for late-2008.
This will drive significant continuing growth for the company, which recorded revenues of $45 million in 2006, up from $33 million in 2005 and $21 million the year before that.
Revenue growth this financial year is expected to exceed 30 per cent, Aitchison said. After a lengthy program of R&D the company is now in a position to exploit its developed Intellectual Property (IP) and revenue growth will outpace workforce increases, he told ADM.
CEA is currently expanding its manufacturing capacity with plans for additional new purpose-built facilities.
The CEAFAR S-Band target tracking radar and CEAMOUNT X-Band target illuminator are lightweight, high-power, active phased array sensors.
The illuminator points a radar beam on an incoming aircraft or anti-ship missile; reflected radar waves guide the ship's Evolved Sea Sparrow Missile (ESSM) to intercept it.
The advantage of a phased array sensor is that its agile radar beam can be switched rapidly between several targets enabling the ship to engage multiple targets simultaneously.
The ANZAC-class frigates currently can engage only single targets using their sole Saab CEROS 200 directors, which will remain aboard the upgraded ships; CEAMOUNT will increase the ships' self-defence capability by an order of magnitude and at an affordable cost, according to Aitchison.
Initial Operating Capability for the first upgraded frigate is currently scheduled for late 2009 with the fleet-wide upgrade due to be completed by 2013.
For an Australian company to provide the fire control radar for an entire class of RAN warships is a considerable achievement: it is a tribute to the customer, who is notoriously risk-averse and prone to doubt, and also to CEA Technologies, which has succeeded in addressing those risks and allaying some of the doubts.
According to CDRE Drew McKinnie, the DMO's Director General Major Surface Ships, "The ANZAC Anti-Ship Missile Defence upgrade program is an ambitious program that seeks to implement leading edge technology sensors and illuminators, as part of an Australian-developed missile self-defence capability. We see the capability advantage offered by the CEA Technologies as being particularly worthwhile.
"These radars offer excellent performance, and will help us extract the best possible performance from our ESSMs, with multiple channels of fire, offering higher probabilities of successful threat annihilation."
DSTO is providing independent risk advice and capability modelling to the ASMD project office, he said. Integration of the new radars will take place under the aegis of the ANZAC Alliance.
"We have a very good understanding of many of the performance and development risks, and can bring much expertise to bear in a whole ship system context," McKinnie told ADM.
"We have already done much combat system development work, and tackled many platform integration issues through our ANZAC Alliance Contract partners, Saab Systems and Tenix Defence.
"We have completed radar concept demonstrators and at-sea prototyping with CEA. We enjoy excellent advisory support from DSTO. We think the development risks are worth taking, and see long-term benefits for Australian industry and Navy in pursuing this leading edge technology.
"I am also optimistic about the potential offered by joint Australian and US effort, through CEA, in the AUSPAR program, which takes these related technologies to higher performance levels."
A key part of the ASMD program is development of an enhanced combat management system, the 9LV Mk3E, by Adelaide-based Saab Systems Pty Ltd, with whom CEA Technologies has a strategic alliance.
The partners have dubbed their radar and enhanced combat system package the CEA-SAAB Australian Air Warfare System (AAWS) and are offering it to navies seeking improved anti-missile defence capabilities in new and upgraded ships, and especially ships fitted with the ESSM system.
The company's credibility in the export market place is undoubtedly strengthened by both its impending ASMD contract and the fact that CDRE McKinnie is Australia's representative in the 10-nation NATO and Evolved Sea Sparrow Missile (ESSM) consortium.
The CEAMOUNT radar is the next evolution on from the continuous-wave X-Band transmitter which CEA Technologies developed for the RAN's original ESSM upgrade as a replacement for the existing X-Band illuminator's transmitter.
The matching of CEAMOUNT with ESSM has made the company's radar technology attractive to current and potential ESSM users, as evidenced by a recent export order for continuous-wave X-Band illuminators from the United Arab Emirates (UAE) Navy to equip its six French-designed Baynunah-class corvettes.
Such is the potential of the AAWS that German shipbuilder Thyssen Krupp Maritime Systems (TKMS), designer of the original Meko 200 frigates from which the Anzac-class is derived, has baselined it for its new Meko D and CSL (Combat Ship for the Littoral) designs.
CEA Technologies and Saab Systems are also offering their proposed solution and capabilities to the Hellenic Navy, which is currently contemplating an upgrade to its own Meko 200 frigates along with a new-build frigate program.
The Canadian Armed Forces are looking for a prime systems integrator for the planned upgrade of their Halifax-class frigates which have a similar sensor fit to the RAN's Anzac frigates; CEA Technologies is in discussion with a potential systems integrator to offer a full radar package in conjunction with Northrop Grumman.
Active phased array radar is becoming CEA Technologies' core business and the company has identified significant market potential for this radar technology beyond its traditional naval customer base.
While the company has also secured key contracts in recent years to provide the internal and external communications systems for the RAN's six Huon-class minehunters and 14 Armidale-class patrol boats, these have helped underpin its ongoing R&D in advanced, high-power radar technology.
The company spends up to 10 per cent of its revenue each year on R&D, Aitchison said, some of which is supported by R&D grants from AusIndustry which supports applied research by companies across all sectors of manufacturing industry.
The CEAMOUNT X-Band illuminator was developed in partnership with BAE Systems Australia Ltd together with AusIndustry. This built on the company's original self-funded R&D activities in active phased array radar which led to the improved Anzac-class solid state continuous-wave illuminator. This was ordered by the RAN some seven years ago and has since been ordered by the UAE Navy.
The CEAFAR radar was developed predominately with in-house R&D funding. It received an important boost when CEA Technologies sold two systems to the US Government, in 1999 and 2000, for undisclosed applications.
As well as the AUSPAR radar development program, which takes place under a US-Australian Government to Government MoU signed in 2005, CEA Technologies has also begun an R&D program supported by AusIndustry into a new family of L-Band surveillance radars.
With CEAMOUNT and CEAFAR approaching maturity, the L-Band radar program will help develop a new product line for the future.
Many details of the AUSPAR technology are classified; Aitchison told ADM only that the R&D program looks at all possible applications of phased array radar technology and aims to develop technologies and capabilities for the next generation of phased array sensors.
It is believed that AUSPAR builds on CEAFAR's key advantages of lightness, high power and scaleability and that it can be applied to anti-ship missile defence, area air defence and even theatre missile defence.
The same basic architecture and antenna design can be scaled up or down for use aboard corvettes, destroyers and even aircraft carriers and amphibious ships.
The US Navy joined the AUSPAR program in 2005 following successful sea trials of a CEAFAR radar aboard the ANZAC-class frigate HMAS Arunta in 2003 and 2004.
The relationship with Northrop Grumman is an important foundation for continuing growth, according to Aitchison. The two firms provide mutual support in their respective domestic markets, he said, while both companies have complementary radar skills and technology and enjoy strong synergies across many areas.
The partners are studying opportunities on the RAN's Air Warfare Destroyer and amphibious landing ship programs, both of which are expected to receive 2nd Pass approval in July this year.
CEA Technologies was founded in 1983 by two former RAN engineer officers, Ian Croser, and David Gaul. Aitchison, himself a former RAN engineer officer, joined in 1990; Gaul has retired but Croser remains fully involved.
The company's head office, electronic design, test, and integration capabilities are located in Canberra while its mechanical design team is in Adelaide with a mechanical fabrication and machining facility in Melbourne.
The company retains the ability to manufacture prototypes and demonstrators in-house, Aitchison told ADM, but series production is generally outsourced. Maintenance and repair are kept in-house.
The Canberra facility will near-double in size when work commences on a new engineering and test centre later this year.
Longer term, Aitchison said, the intention is to float the company on the Australian Stock Exchange. This plan has the blessing of Northrop Grumman, but because of CEA Technologies' strategic importance will require a positive recommendation from the Federal Government's Foreign Investment Review Board and final approval from the Treasurer.
As a privately-owned company, CEA Technologies hasn't disclosed profit details beyond those required for statutory filings. When plans for the float begin to mature the company will produce detailed financial statements.
Sydney-based Deutsche Asset Management, was a minority shareholder in the company during its early expansion until the Northrop Grumman share purchase; sources there declined to discuss CEA Technologies as the bank no longer has an equity stake.
However, a source at parent company Deutsche Bank told ADM that if CEA Technologies were to be floated it would be one of only a handful of Australian publicly listed defence companies.
CEA Technologies Pty Ltd - Three-Year Growth
YEAR Revenue No. of Employees
2004 $21 million 189
2005 $33 million 202
2006 $45 million 228
2007 Revenue growth to exceed 30%.
Source: CEA Technologies Pty Limited
Copyright Australian Defence Magazine, April 2007