KONGSBERG DEFENCE & AEROSPACE
TOM GERHARDSEN, PRESIDENT

The development of the new anti-ship missile is the largest project in Kongsberg Defence & Aerospace's history. The final successful test firing of the missile demonstrated that it is the most advanced missile of its class in the world today. That makes it attractive on the market. A joint marketing agreement has been signed for a new custom-made product for fighter craft, the Joint Strike Missile (JSM). It is being developed for possible deployment on the US Joint Strike Fighter (JSF), the Eurofighter and the JAS Gripen.

The framework agreement with the US Army makes Kongsberg Defence & Aerospace by far the main and clearly the largest supplier of weapon control systems to the US and the rest of the world. The framework agreement will open new opportunities in the US and other countries. Consequently, Kongsberg Defence & Aerospace is expanding its production capacity and upsizing in the US.

The new composite plant in Kongsberg is scheduled for completion in 2008. Although it will take five or six years before the plant is in full production, hopes run high for composite production. Besides producing the hull of the NSM missile, Kongsberg Defence & Aerospace has signed long-term framework agreements with Lockheed Martin and Northrop Grumman for the production of composite products for the new JSF fighter craft. The agreements are conditional on Norway selecting the JSF. This fighter craft is one of three alternatives being considered to succeed the F-16 aircraft. The company is also cooperating with Saab to define potential composite assignments if the JAS Gripen is chosen to be Norway's new fighter craft. It is not clear whether the Eurofighter is still in the running, but such a choice would also entail opportunities for the composite plant. The commissioning of the composite plant means Kongsberg Defence & Aerospace will have to hire a number of new skilled workers in 2008. The plant will also be equipped with advanced production facilities for titanium parts, and it will complete and strengthen our Aerostructures business.

We also expect good performance from the Naval Systems & Surveillance Division in 2008. Completion of Norway's frigate and MTB programmes is on schedule for Kongsberg Defence & Aerospace's part. Surface traffic surveillance is increasingly being supplemented by underwater surveillance off coasts and in harbours. Kongsberg Defence & Aerospace has contracts for civilian and military harbours alike. Although there are many competitors on the market, we expect to see satisfactory progress.

The same applies for the Integrated Defence Systems Division. The market prospects are good and we continue to cooperate with Raytheon on medium-range air defence systems. In communications, we expect the introduction of an updated radio line product to result in new orders.

Kongsberg Defence & Aerospace is still Norway's largest aerospace enterprise. The public sector aerospace market is growing slowly, but the European Space Agency (ESA) market is not growing beyond the level of the dues Norway pays to ESA for participation in ESA's jointly financed development programmes for new products for the private sector aerospace market. Aerospace activities are important to Kongsberg Defence & Aerospace because they complement the military technology areas and facilitate synergies across the divisions.