Extending our Horizons - Singapore Technologies Engineering

AerospaceST Aerospace prides itself in having a clear focus on the interestsof customers, big and small. Despite the aviation downturnover the last few years, it had a robust order book throughout2004 that included PTF aircraft conversions, maintenance workand development activities.INDUSTRY REVIEWIn 2004, with stronger global economic growth,air travel rose from the depressed levels of theprevious three years. Profitability of the aviationindustry, on the other hand, remained affected bythe after shocks of 9/11, the war in Iraq, SARS andthe rise in fuel prices.While passenger load factors rose, flight frequencyand yields did not recover to pre 2001 levels.Some airlines appeared to be recovering toprofitability or reduced losses. Legacy airlines ingeneral continued to re-engineer their operationsand reduce costs in the face of rising fuel prices,higher interest rates and increased competitionfrom the rise of LCCs.The weakening US dollar, coupled with risingUS interest rates, led to higher financing costsSingaporeTechnologiesEngineering LtdAR 2004 46

Flying High through Total SupportSingapore Technologies Aerospace (ST Aerospace), theGroup’s aerospace arm, is a leading third party aviationmaintenance and engineering specialist.With almost three decades of supporting the Republicof Singapore Air Force (RSAF), ST Aerospace isthe strategic partner of the RSAF and has beenmeeting their exacting requirements for leading edgetechnologies. Today, it has a global customer base,serving military air forces, commercial airlines andfreight carriers.Penetrating new marketsBacked by its span of capabilities, range of innovativesolutions and track record in turnaround time andquality work, ST Aerospace was able to capitaliseon new market opportunities. One such market wasthe emerging Low Cost Carriers (LCCs). Throughprogrammes such as Maintenance By the Hour (MBH)and Total Aviation Support (TAS), ST Aerospace offeredcomprehensive and flexible solutions that enhanced itscompetitive position in this segment, especially in Asia.In 2004, AirAsia awarded ST Aerospace a secondcontract of US$63.5m ($104m) for Maintenance, Repairand Overhaul (MRO) services for 10 of its aircraftpowered by CFM56-3 engines. Valuair was the sourceof another similar TAS contract. Jetstar Asia becameST Aerospace’s latest customer with a US$47m ($77m)contract for its fleet of A320s, which will grow toeight by 2005. The contract is for line, light and basemaintenance, engineering and technical services, aswell as components management and support.Expanding capabilitiesST Aerospace’s major facilities are located at Changi,Paya Lebar and Seletar airports, Singapore; Mobile andSan Antonio, USA; and Bournemouth and Stansted,UK. A new capability for commercial airframe MRO wasadded this year in the expanding Chinese market withthe establishment of Shanghai Technologies AerospaceCompany (STARCO) in Shanghai. STARCO, a jointventure with China Eastern Airlines, gives ST Aerospacean important foothold in China’s fast growingaviation sector.The Aircraft Maintenance & Modification (AMM) grouphas, since 2003, strengthened its repair capabilitiesfor all narrow and wide-bodied Airbus, Boeing andMcDonnell Douglas aircraft types, including the mostrecent A330, A340 and the B777. For military aircraft,ST Aerospace extended its capabilities to the F-16fighter aircraft and the Chinook helicopter. Thesecapabilities included airframe as well as enginesand components repair and overhaul. The companycan now service a wide range of military aircraftand helicopters.In 2004, in response to customer demands,ST Aerospace added three new hangars. Costingabout US$20m ($33m), they comprise two at STMobile Aerospace Engineering (MAE), USA, and oneat ST Aviation Services Co (SASCO), Singapore. STAerospace is also building two narrow-body slots at itsSeletar facility for ST Aerospace Engineering. These areexpected to be ready in early 2005. At the samefor US operators. This added to their difficultiesarising from falling revenues. Continued US dollarweakness may result in other complications; othercurrencies, including the Chinese yuan, may depegfrom the US dollar and revalue.The MRO industry was reported to have shrunk by14% from 2001 due to reduced flying hours, theretirement of maintenance intensive older aircraftand postponement of non obligatory maintenanceand modification work. Many MROs experienceddifficult times and some have ceased operations.Nevertheless, the industry still faces overcapacity,and further consolidation is possible.Legacy airlines are expected to continue torestructure their operations to focus on their corebusinesses and outsource their MRO work to reduceIndustry Review >>47TheEnterpriseInstinct

Aerospacetime, a wide-body aircraft hangar is being planned inSTARCO at Pudong Airport to complement the existingtwo hangars at Hongqiao Airport, Shanghai.On engine support, ST Aerospace further developedcapabilities for the B737CG, B737NG and the F-16.Service centre agreements were renewed with RollsRoyce for the repair and overhaul of the T56/501Dengines. New service centre status was also granted byHoneywell for the repair and overhaul of itsT55 engines.On non engine support, the Component/Engine Repair& Overhaul (CERO) group extended its capabilities forthe A320, A310/300, B777, B767, B757, B737NG,B737CG and MD-11 commercial aviation components,as well as added new capabilities for the F-16 andChinook military components. ST Aerospace receivedadditional authorisation from Original EquipmentManufacturers (OEMs), including Howell Instruments, forthe repair and overhaul of all its products in South EastAsia; Sargent Controls & Aerospace for its hydraulicvalves in Asia; and Parker Aerospace for the promotionand repair of its F-16 hydraulic pumps in Singapore.Notable service centre renewals included an agreementwith Eurocopter for the SA-330, AS-332 and AS-550helicopters in Asia.The Engineering & Materials Services (EMS) groupconsolidated its strengths in engineering expertise.It began development on variants of the B757Passenger To Freighter (PTF) conversion including a15 pallet configuration and marketing its 14 1 / 2 palletconfiguration on an approved Boeing SupplementalType Certificate.ST Aerospace’s Engineering and Development Centrecompleted Maintainability and Reliability Engineeringstudies that enabled customers to improve their fleetcost efficiency. This was an important service tocustomers, especially those on TAS programmes.>> Industry ReviewMRO Market Value & Forecast20012002200320042009$42.2$37.8$36.1$37.0$41.8operating costs. This is a business model the LCCshave adopted from the start.Strand Associates Inc, an aviation consulting firm,estimates that half of MRO work is now outsourcedcompared to one third 10 years ago, and expects abouttwo thirds to be outsourced by the end of the decade.Chart infomation and italicised text source: Overhaul and Maintenancemagazine, April 2004.2014$49.10 10 20 30 40 50US$ bLine Maintenance ComponentsEngineHMV & MODSSingaporeTechnologiesEngineering LtdAR 2004 48

ST Aerospace’s quality MBH programmessecured a second contract for the maintenance ofCFM56 engines used on AirAsia’s 10 aircraft.A joint venture company with China EasternAirlines, STARCO is the latest addition toST Aerospace’s global network of facilities thatoffers MRO services for commercial aircraft.Developed in less than two years for surveillanceactivities, ST Aerospace’s hand launched mini UAV,the Skyblade II, was unveiled in 2004.ST Aerospace used its Aircraft Maintenance andEngineering System, also known as AMOS, to supportthe maintenance planning needs of TAS customers.The software performs maintenance planning, reliabilitycalculations, components and rotables tracking andaircraft scheduling. AMOS thus enables customersto be updated real time on the progress of theirmaintenance programmes.In 2004, the engineering and development arm ofST Aerospace filed six patents.Winning new customersMajor overseas military projects in 2004 includedthe US Pacific Air Force C-130 programme fordepot maintenance work, the refurbishment of 20UH-1H helicopters for the Philippines Air Force anda fleetwide avionics standardisation programme foranother customer. ST Aerospace extended its rangeof capabilities in the Unmanned Aerial Vehicles(UAV) arena through the launch of its Skyblade II forsurveillance activities.In engineering and modification activities,ST Aerospace undertook more PTF modifications,design and development programmes. In 2004,apart from UPS, other airlines such as China EasternAirlines, EVA Airlines and Lufthansa Cargo alsocommissioned MD-11 conversions. All in all, therewere 38 MD-11 conversion orders secured,of which 18 were redelivered by yearend.The Engines business firmly established its positionas an MRO and MBH provider for the militaryaviation market and the CFM56 and JT8 market. Itscomponents repair and overhaul capabilities assuredgood turnaround time and responsive support tocustomers with quality delivery. These represent astandard that customers have come to expect fromST Aerospace.In the commercial sector, ST Aerospace furtheredits relationship with its blue chip customers suchas All Nippon Airways, FedEx Express, Japan Airlines,Northwest Airlines and United Airlines. It signeda 10 year contract with United Parcel Service(UPS), for approximately US$438m ($715m), toexclusively maintain UPS’ DC-8s, A300s and MD-11sat ST Aerospace’s repair stations globally. There werealso new customers, large and small, further positioningthe aerospace group as a global service provider.49TheEnterpriseInstinct

ElectronicsPhoto courtesy of Land Transport Authority, SingaporeWith 35 patents filed since 1998 and 15 patents already granted,ST Electronics continued to innovate, launching customisedsolutions in communications, homeland security, electronics andInformation Communications Technology (ICT).INDUSTRY REVIEWIn 2004, major economies showed clearer signsof sustainable growth. Regional economic growthwas also stronger. Several regional economies nowhave healthier public finances to address issues likeinadequate transportation infrastructure and theconsequent traffic congestion in cities. Hence, moreAsian cities are planning to extend or build new railand mass rapid transit systems.However, uncertainties remain. If oil and commodityprices continue to rise, economic growth willinevitably slow; these higher raw material costswill affect profit margins. Terrorism remains a keyconcern, its effect on tourism and travel still severein some parts of the world.The need for heightened security is a sign ofthe times and countries are responding to thisSingaporeTechnologiesEngineering LtdAR 2004 50

Bringing Cutting Edge Solutions to the WorldSingapore Technologies Electronics (ST Electronics), theGroup’s electronics arm, is a leading electronics andICT system house with offices in Australia, China, HongKong, Malaysia, Mexico, Taiwan and the US, marketingto more than 60 countries. In 2004, ST Electronicspenetrated new markets and won new customers,expanded its capabilities and continued to introducecutting edge commercial and defence applications.Penetrating new marketsST Electronics and its subsidiaries made further inroadsinto China this year. Its Large-Scale Systems (LSG)division was commissioned by Guang Zhou MetroCorporation in Guangdong province to provide anAutomatic Fare Collection (AFC) system for the MassRapid Transit (MRT) Line 4. It will design, supply, installand commission the AFC system, including the ticketvending machines. CET Technologies (CET) was alsoawarded a contract to provide on-train communicationssystems for another Guangzhou MRT Line. Thesecontracts enhanced ST Electronics’ profile in Chinain intelligent building, rail electronics and trafficmanagement systems.ST Electronics also broke new ground in Taiwan. It wasawarded a contract for a communications and disasterrecovery system and to supply a new fleet of forwardcommand and communication vehicles by the NationalFire Agency (NFA) (under Taiwan’s Ministry of Interior).When delivered in 2006, this $11.6m system will allowthe NFA to mobilise and coordinate emergency rescueand disaster recovery efforts across Taiwan.Another success was Agilis CommunicationTechnologies (Agilis) being selected by OSCMARInternational of New Zealand to supply a commercialsatellite broadband solution for its combat training,simulation and instrumentation products. Its Very SmallAperture Terminals will be used to form a high speedbackbone enabling realistic ground troop combattraining in real time over widely dispersedgeographical locations.SES Systems (SES) entered new markets in Africa andIndia. In Botswana, the Ministry of Energy, Minesand Water Affairs, the Department of Taxes and theBotswana Police Service contracted SES to developand provide e-Government solutions. SES also won,against stiff international competition, a contractfrom the Airports Authority of India to supply an AirTraffic Control Aerodrome Visual Simulator for its CivilAviation Training Centre.Expanding capabilitiesST Electronics continued to innovate, launchingcustomised solutions in areas like communications,homeland security, electronics and ICT.It launched a purpose-built solution, Maritime, Aviationand Port Security (MAPS), to tackle today’s terrorismthreats and uncertainties facing ports, airportsand key installations and infrastructures. MAPSintegrates automated surveillance, threat detection,assessment and immediate response in one solutionfor key installations. Using state of the art sensorsand electronic fences, command and control, securedthrough various public safety and homelandsecurity solutions.There were also significant developments in China.To forestall overheating of the economy, Chinesepolicy makers tightened credit and spending, cuttingor delaying large infrastructure projects. Indicationsso far are that the Chinese economy will not slowsignificantly. The spending curbs have also not beenuniformly applied to the larger cities like Beijing,Guangzhou and Shanghai nor to major infrastructureprojects. These cities will need to continue tobuild their infrastructure to prepare for major hostactivities like the Beijing Olympics in 2008 andthe Shanghai World Expo in 2010. These variousmedium term requirements would likely createbusiness opportunities for the sector.Industry Review >>51TheEnterpriseInstinct

Electronicscommunication and tracking devices, MAPS offerssurface and sub-surface surveillance protection tovessels at ports and wharves and, most importantly,helps secure port infrastructure.LSG launched its third generation ST8100, SecurNetIntegrated Security and Emergency ManagementSystem this year. The new system, operating on thelatest Windows XP platform, integrates digital videosurveillance and perimeter protection. It has beendeployed in various defence and commercial sites.To meet increasingly complex communications needs,Agilis developed and launched new solutions: theCoastal and Mobile Surveillance Systems offering 24x7,all weather automated surface surveillance radar; theC and Ku band high power BUC and dual feed antennaefor operators that require simultaneous dual frequencyoperations; and an enhanced Network ManagementSystem for greater control and tracking of assetsin a communications network for seamlesssystem operations.In another innovation, CET developed its fleetmanagement and wireless communications capabilitiesinto telematics solutions.By integrating General Packet Radio Service (GPRS),Bluetooth and Global Positioning System (GPS),telematics equip vehicles with wireless communicationsand computing capabilities. Users can then accessthe internet, emergency assistance, information andservices on the go. CET also developed a rangeof hardware based encryption devices for laptopcomputers and the world’s first multi functionaluniversal serial bus token for logical and physicalaccess to meet the demand for data and communicationsecurity for people on the move.ST Electronics also rolled out various training andsimulation systems through ST Training & Simulation(STTS). These included cost effective training systemslike the Unmanned Aerial Vehicle (UAV) Trainer and theAdvanced Combat Emulator.ST Electronics continued to form partnerships with, andinvest in, regional and international players to providevalue added solutions and penetrate targeted markets.It acquired a 21.35% equity stake in ECS Holdings(ECS) through SES. ECS’ products and servicescomplement SES’ real time solution thrusts, while SESwill leverage on ECS’ channel coverage and businessnetworks in the region, particularly in China.>> Industry ReviewApart from economic developments, the industryis being influenced by shifts in customer needsand preferences towards intelligent infrastructureelectronics systems.prefer arrangements like turnkey EngineeringProcurement Contracts with full financing, BuildOperate and Transfer or Build Own Operateand Transfer.The industry in the region is also being shaped bytrends in business practices and models. In somecountries or sectors, where customers lack funds,project financing is typical. These customers alsoSingaporeTechnologiesEngineering LtdAR 2004 52

MMDS brought cable programmes to homes inLatin America.Installation of VSAT Terminalin Marseille, Southern France.Real time and mission critical software solutions.SES also took a 25% equity stake in Sandz Solutions(Singapore) (Sandz) which provides solutions andproducts in high performance computing and otherbusiness solutions for the financial services andtelecommunications industries and public sectoragencies. SES will leverage on Sandz’s expertise andits network of contacts, particularly in Indonesia andthe Philippines.In China, SES set up Xinke Information Systems inShenzhen to tap the talent pool there to supportcustomers and provide public safety solutions toGuangzhou and Shenzhen.Winning new customersST Electronics continued to win new customers fromaround the world.It will provide a rail communications solution for Taipei’sMRT/MCT (Medium Capacity Transit) system. This $61mcontract to LSG is for a communications system for twoMRT lines and for upgrading the existing radio analogsystem to the more advanced Tetra Radio System. Thiscontract reinforces ST Electronics’ reputation in Taiwan,where it has been providing quality rail solutions inTaipei and Kaohsiung since 1993.CET was awarded a $163m contract by KnowledgeInternet Solutions for an automotive telematics systemin Thailand. This will provide drivers with mobileinformation services including access to emergencyroadside assistance and entertainment.In Latin America, ST Electronics’ Multi-channelMultipoint Distribution System (MMDS) downconverterscontinued to gain market share. Latin America is apotentially large market for this product as MMDSprovides digital quality television transmission toareas where terrain makes it difficult to build terrestrialcommunications infrastructure. Orders since 2002amounted to about $55m.STTS secured a number of projects in 2004 includingone from Mitsui OSK Line to provide securityconsultancy for their vessels passing through theStraits of Malacca. STTS will also provide ship handlingtraining services to the Republic of Singapore Navy(RSN). The Royal Thai Armed Forces also awardedSTTS a contract to upgrade its helicoptersimulator programme.Two of ST Electronics’ subsidiaries have been awardedwork for systems on five frigates for the RSN. Thefirst locally built frigate was launched in July andoutfitting work will commence with CET providing anadvanced communications system. SES will provideStandard Operating Common Consoles for the CombatInformation Centre, where the ship’s command team willdirect and orchestrate all warfare activities.IT developmentsST Electronics stays on the forefront of technologywith 35 patents filed since 1998 and 15 patentsalready granted.Agilis has implemented a new automated TimeCharging Management System (TCMS) for more costeffective project analysis and planning. The project alsowon the National IQC Convention 2004 STAR Award.ST Electronics also introduced a supply chainmanagement solution for e-shipping. This providesfor better management of outshipment processes andenhances efficiency in validation of freight invoices.53TheEnterpriseInstinct

Land SystemsST Kinetics remained resolute in its efforts to access newmarkets and customers, packaging products and solutions fordefence and commercial customers around the world.INDUSTRY REVIEWCommercial SectorIn 2004, Asian economies showed stronger growth,recovering from negative developments in theprevious year, such as SARS. Their long termgrowth prospects seem intact, signalling continuedinfrastructure and project spendings over themedium term.While China expects to cool its economy in theshort term, it continues to offer exciting prospects.Since 2003, annual Foreign Direct Investments (FDI)into China have exceeded FDI into the US. FDI intoChina was estimated at about US$54b and US$60bin 2003 and 2004 respectively (Source: CEIC Data).The strong FDI boosts China’s plans to moderniseits infrastructure and develop its energy and powersector. In turn, the construction industry andrelated sectors, such as heavy equipment andvehicles, will likely see sustained growth over thenext few decades.SingaporeTechnologiesEngineering LtdAR 2004 54

Setting the Pace for New ChallengesSingapore Technologies Kinetics (ST Kinetics), theGroup’s land systems arm, designs, manufacturesand services a wide range of military and commercialvehicles, weapons and munition systems. In 2004,it continued to provide cutting edge technologiesto address the growing needs in homeland securityand the modern battlefield. Leveraging on corecompetencies, it has expanded its commercialbusiness and accelerated its penetration into China’srapidly expanding construction equipment andautomotive sectors.Penetrating new marketsST Kinetics remained resolute in its efforts to accessnew markets and customers, packaging products andsolutions for defence and commercial customers aroundthe world.The Bronco All Terrain Tracked Carrier continued toattract interest from many overseas armies. In July,ST Kinetics was awarded a feasibility study contractto explore the development of a Future All TerrainVehicle for the Finnish Defence Forces. This endorsesST Kinetics standing as an international defencecompany. As part of the evaluation, the Broncoclocked more than 8,000km over a six month periodunder harsh arctic conditions in Finland. It alsosurpassed expectations in mobility trials conductedelsewhere in Europe, Africa, Asia Pacific and the US.As part of its US thrust, ST Kinetics sealed aMemorandum Of Understanding (MOU) with LockheedMartin in February for joint cooperation in the area ofmanned and unmanned ground systems.In September, ST Kinetics joined forces with an industrypartner to propose an integrated maintenance, repairand overhaul outsourcing solution to the United ArabEmirates Armed Forces. The result of this internationaltender is expected to be known in the first halfof 2005.On the home front, as the strategic partner to theSingapore Armed Forces (SAF), ST Kinetics continuedto invest in new technologies to align its capabilitiesto the SAF’s vision for a leaner and more potent ThirdGeneration (3G) Army. There were also continuedcontractual deliveries of the Primus Self PropelledHowitzer, Bronco, SAR 21 Assault Rifle as well asother services.In the commercial business sector, ST Kineticsachieved milestones in penetrating the Chinesemarket. In March, Beijing Zhonghuan Kinetics HeavyVehicles (BZK), a 50-50 joint venture (JV) with BeijingHeavy Duty Truck Plant, commenced operations.In 2004, BZK produced 120 units of 20 tonne OffroadDump Trucks (ODT) and 20 units of 32 tonneODTs. It has also produced 10 Bulk Cement Tankersand expects type approvals for Concrete Mixers byearly 2005.Following the MOUs, STAR Automotive signed with SinoStride Technology (SST) and Pacific City InternationalHoldings (PCI), JV agreements were signed in Decemberto set up two premier automotive repair and inspectioncentres to service the Guangdong, Jiangsu andThe long term growth prospects for China alsohighlight the growth potential of its automotiverepair and maintenance services sectors.Defence SectorThe 9/11 attacks, the threat of terrorism and theavailability of technology driven weapons andsystems had led armed forces to rethink theirdoctrines on training, equipment and warfare.Defence forces are investing in new combatcapabilities such as: smarter weapons which givemobility and are more lethal and accurate; multirole platforms that can operate in a wider varietyof scenarios offering improved payloads withoutcompromising transportability; network-centricsystems that give commanders real time battlefieldinformation and the capability to direct precisionfirepower and other responses.Industry Review >>55TheEnterpriseInstinct

Land SystemsZhejiang provinces. These will enable ST Kinetics toexport its expertise as a one stop automotive centre toChina. Both JV companies are expected to commenceoperations in the second half of 2005, subject toregulatory approvals.In December, ST Kinetics divested its stake in itssubsidiary, Solectria, in a share exchange agreementwith Azure Dynamics. A company listed in London andToronto, Azure Dynamics complements ST Kinetics’current capabilities in hybrid electric technologies andwill offer greater leverage in terms of marketing andproduct expansion.To grow its exports, ST Kinetics believes it has topartner with local operators. Whether for marketaccess or complementary technologies, it is open toJV partnerships and acquisitions as part of its growthstrategy. In 2004, ST Kinetics has been activelyidentifying and evaluating potential candidates foracquisitions in the area of specialty vehicles.Expanding capabilitiesFuture land warfare calls for equipment that is multirole, adaptable and highly deployable. ST Kinetics hasintroduced innovative solutions that incorporate thesefeatures. It unveiled a revolutionary Active ArticulationVehicle concept using its Bronco as a reference.Allowing articulated platforms to couple and decouplequickly into two independent vehicles, this conceptcould transform the potential role of conventionalarticulated carriers in both the battlefield as well ashomeland security situations.Another design achievement was the dual calibreSquad Support Weapon (SSW) that combined a semiautomatic 40mm grenade launcher and a personaldefence weapon into a single, light weight handheldweapon. Conceived for the challenges of militaryoperations in urban terrain, the SSW is one of thefew handheld weapons developed in the world with afire control system that equips soldiers with a lethalair bursting capability formerly available only on crewserved weapons.ST Kinetics also launched the newly designed Spider –a six seater Light Strike Vehicle (LSV) with a collapsibleroll cage frame to allow the stacking of two vehicles formore efficient transportation. The improved prototypefeatures better speed, mobility, road performanceand higher payloads for a greater variety ofweapon configurations.>> Industry ReviewAs a result, military spending on conventionaldefence products has been reduced. Industryplayers are therefore required to transformthemselves to meet the changing market trends.Additionally defence budgets have come underscrutiny. The European industry has been hit bydefence spending cuts by governments facingbudget deficits. In the US, defence spending hasbeen maintained, due partly to the country’scontinued engagement in Iraq. However, USdefence spending will be constrained by its largebudget deficit.Reflecting these trends, the defence industry inthe industrialised countries is consolidating. Themove is towards fewer but bigger and strongerplayers. This has fuelled changes in the waySingaporeTechnologiesEngineering LtdAR 2004 56

Innovative designs like the Spider LSV enableefficient transportation by allowing two vehiclesto be stacked.BZK commenced production of heavy industrialspecialty vehicles including ODTs in 2004.Joint ventures, such as that with PCI, enableST Kinetics to grow its commercial automotiveexpertise in China.The threat of terrorism has created urgency forhomeland security solutions. Leveraging on itsexperience in ordnance development, ST Kineticsembarked on R&D for comprehensive solutions inhomeland defence. It is also collaborating with industryallies to package and market solutions on three fronts:prevention, protection and response.A highly customised Threat Containment Vessel thatcan withstand up to 5kg of TNT blast capacity wasdeveloped to preserve surrounding vicinities in theevent of explosive threats.ST Kinetics has also developed a range of homelandsecurity specialty vehicles. In August, it secured aSingapore Civil Defence Force contract for HAZMATSupport Vehicles. These are custom configuredlogistics vehicles equipped with detection andmonitoring devices to support operational requirementsfor the containment of hazardous materials. ST Kineticswas also contracted in March to supply ambulances tothe Singapore Ministry of Defence.Winning new customersIn 2004, ST Kinetics’ divisions and subsidiariescontinued to add to their customer base. In Singapore,STAR Automotive expanded its clientele and secured athree year fleet management contract from SMART taxis.Five new franchisees were introduced this year, bringingthe total number of STAR franchisees to seven. As atend 2004, it is the appointed Accident Repair QualityWorkshop to 23 insurance companies,an increase of three over 2003.STA Inspection secured vehicle inspection contracts forCityCab taxis and a fleet of police vehicles in 2004.It is seeking approval to operate a sixth IndependentDamage Assessment Centre.Singapore Test Services extended its scope ofaccredited services to include the inspection of liftingdevices, flowmeter calibration and microbiology testson Chinese proprietary medicines, pharmaceuticaland health products. It also set up an additionalclimatic walk in chamber for reliability testing ofcomputer peripherals, storage media and wirelessinfocomm products.ST Kinetics will continue to embrace new opportunitiesand strengthen core capabilities to stay relevant to itscustomers. It will also commit resources to grow itscommercial interests, especially in specialty vehicles.defence companies operate and participate in majorprogrammes. Defence spending in Singapore, bycontrast, has remained consistent with the defencebudget maintained at between 4.5% to 5.5% ofGross Domestic Product (GDP).Singapore: Defence Budget as % of GDP1999 5.2%20004.6%2001200220035.1%5.2%5.2%Source: Singapore Ministry of Finance, various reports57TheEnterpriseInstinct

MarineTogether with its US operations, VT Halter Marine, ST Marinesecured new contracts and achieved significant milestonesduring the year, planting it firmly in the league of premiershipyards in the world.INDUSTRY REVIEWCommercial NewbuildingBoosted by a strong increase in freight rates, theshipbuilding market in 2004 saw many orders formega container vessels, Liquified Natural Gas (LNG)vessels and Very Large Crude Carriers (VLCC). Thecorresponding rise in prices of steel and othernewbuilding materials saw shipyards operatingat lower profit margins. Competition among theshipyards has also been keen, especially fromthe Chinese, Japanese and Korean shipyards. Inparticular, Chinese shipyards were successful insecuring a significant share of newbuilding ordersdue to the low prices they offer.In Singapore, with growing world trade and anageing fleet, the feeder container and the tankernewbuilding markets will be more buoyant. Inaddition, legislation for all tankers to be double hullSingaporeTechnologiesEngineering LtdAR 2004 58

Spanning the OceansSingapore Technologies Marine (ST Marine), the Group’smarine arm, is a premier shipyard that provides turnkeyshipbuilding, shiprepair and ship conversion servicesfor a wide range of naval and commercial vessels. Ithas a global clientele, spanning Asia, Europe, theMiddle East and the US.Penetrating new marketsSince its incorporation in October 2002, VT HalterMarine has been ramping up its operations and hasextended its market reach, securing a variety of newcontracts. The US Defence Security CooperationAgency has named VT Halter Marine a prime contractorfor a possible foreign military sale of three Fast MissileCraft to Egypt. The total value of the sale between thetwo governments, if all options are exercised, couldamount to US$565m ($925m).VT Halter Marine’s capabilities in delivering innovativeshipbuilding solutions were again affirmed whenit secured a US$85m ($146m) contract, whichincludes the cost of owner furnished equipment, toconstruct two Articulated Tug Barge (ATB) units forVessel Management Services, a subsidiary ofCrowley Maritime.In November, it secured a US$31m ($51m) contract tobuild a double ended passenger/vehicle ferry for theNantucket Steamship Authority.Other contracts signed included one with LockheedMartin, valued at US$18m ($31m), for the design andconstruction of two Harbour Tugs and a US$5.2m($9m) contract to build a Stevedoring Crane Barge forTide Leasing Company.VT Halter Marine began the year with the delivery of astate of the art Offshore Supply Vessel, ‘Seacor Pride’,to a reputable offshore operator in the US.Shortly after, VT Halter Marine delivered superstructuresfor the retrofit and upgrade of Island Class Cuttersin February under the US Coast Guard DeepwaterProgramme. VT Halter Marine is contributing itsexpertise through the Halter-Bollinger joint venture.For newbuilding projects, the keel was laid for theNational Oceanic and Atmospheric Administration’s(NOAA) second Fisheries Survey Vessel (FSV). TheFSVs, which VT Halter Marine is currently constructing,meet the exacting standards of NOAA and are the mosttechnologically advanced in their class. During the year,VT Halter Marine also laid the keels for two ATBs forVessel Management Services.2004 also saw several vessels launched at VT HalterMarine. These included the sea going ferry ‘Caribena’for the Puerto Rico Port Authority; ‘MG Robert Smalls’,the second of two Logistic Support Vessels (LSVs)for the US Army; and ‘Jean Anne’, a Pure Car TruckCarrier (PCTC) built for Pasha Hawaii Transport Lines.The latter is the largest vessel to be launched by amid sized shipyard in the US and the first car carrierto be built in the US. Finally, Tide Leasing Company’sStevedoring Crane Barge, ‘Columbia 5’ was launched inthe last quarter of 2004.by 2010 will also present opportunities for localshipyards.Competition in the US among the mid sizedshipyards is also intense. However, there areniches of business opportunities. This includesincreasing demand, deriving from the Jones Act*,for tankers and container ships, large OffshoreSupply Vessels and Anchor Handling Tug/Supplyvessels, as well as large, fast Ro/Pax vessels for bothmilitary and commercial use. New orders, especiallyfor Articulated Tug Barges, are also expected forreplacement of ageing vessels and for vessels thatcomply with the Oil Pollution Act.* The Jones Act requires that vessels used to transport cargo andpassengers between US ports be owned by US citizens, built in USshipyards and manned by US citizen crew.Industry Review >>59TheEnterpriseInstinct

MarineExpanding capabilitiesThe frigate newbuilding programme for the Republicof Singapore Navy (RSN), which started in 2002, is infull swing. For this major project, ST Marine upgradedits facilities to meet the requirements for extensivescheduling, logistics, technical and project managementexpertise. ST Marine staff also rose to the challenge bycreatively redesigning work processes.This programme gathered pace during the year. InJuly, the first locally built frigate, ‘RSS Intrepid’, waslaunched by Mrs Lee Hsien Loong, wife of Singapore’sthen Deputy Prime Minister and Minister for Finance.The successful launch of ‘RSS Intrepid’, the largestand most sophisticated warship ST Marine has built,affirmed ST Marine’s capabilities as a world class navalshipbuilder and shipyard.The RSN frigates are significant for the local defenceindustry as they will be the most sophisticated additionto the RSN fleet. These state of the art warships havestealth features and advanced combat capabilities tocounter surface, air and underwater threats. They arealso highly automated and technologically advanced,requiring a crew of only 70.During the year, ST Marine also held keel layingceremonies for Frigate 4 in May and Frigate 5in November.Winning new customersIn October, ST Marine was awarded a contract worthabout $20m by the Ministry of Interior, Kuwait, todesign and build a 49m Landing Supply Craft. This isa multi purpose vessel for both transport and supplyoperations and for law enforcement duties in theArabian Gulf. It will be designed to carry Roll-on-Rolloffgoods as well as liquid, refrigerated and generalcargoes. This is the second newbuilding contract fromKuwait’s Ministry of Interior. The first, for two 43mLanding Supply Craft, was awarded in 1994.ST Marine successfully won this tender over fiveother shipyards which had qualified. This testifiesto the quality of the earlier Landing Supply Craft ithad delivered.>> Industry ReviewNaval NewbuildingOpportunities continue to be available in the navalnewbuilding market. In the US, the US Coastguard’sDeepwater programme and the US Navy’s JointHigh Speed Vessel (JHSV) programme will spawnshipbuilding opportunities. There is also anemerging demand for specialty products such asresearch vessels and patrol craft.ShiprepairCompetition within the shiprepair sector remainskeen, especially from Chinese yards which quotedlower steel renewal rates. However, shipyards withthe proven capability to provide quality and reliableshiprepair services will have a competitive edge.SingaporeTechnologiesEngineering LtdAR 2004 60

The first locally built frigate, ‘RSS Intrepid’ waslaunched by Mrs Lee Hsien Loong, wife ofSingapore’s then Deputy Prime Minister andMinister for Finance.Keel laying ceremonies for Frigate 4 and Frigate 5were held at ST Marine during the year.VT Halter Marine launched ‘Jean Anne’, the firstPCTC to be built in the US.The shiprepair business continued to grow its customerbase even as it continued its relationships withprominent players such as Stolt Nielsen, USA; Odfjell,Norway; Van Oord and Boskalis International, Holland;and the Belgian company, Dredging International.New shiprepair customers included Accord ShipManagement, India; Inai Kiara, Malaysia; StarManagement, Japan; Osterreichescher Lloyd Groupas well as Schlussel Reederei, Germany.ST Marine also completed major assignments such asthe grounding damage repair of the bulk carrier, ‘OceanHope 2’, from MK Shipmanagement of Japan; collisiondamage repair of the bulk carrier, ‘Katerina’, fromEurocarriers, Greece; as well as major steelwork repairsfor the bulk carrier, ‘Emir’, from E-Maritime, Singapore.The dredger repair market continues to remain softbecause of curbs by regional governments on theexport of sand for regional reclamation projects.61TheEnterpriseInstinct