SINGAPORE (Oct 29): ST Engineering has agreed to jointly develop a 655,000 sf airframe maintenance, repair and overhaul (MRO) complex at the Pensacola International Airport as part of the group’s capacity expansion for its MRO business in the US.

The development will be undertaken by ST Engineering and the City of Pensacola over the course of four years and is expected to cost about US$210 million ($290 million).

A Memorandum of Understanding (MoU) was signed between both parties on Saturday.  

Under the terms of the agreement, ST Engineering will invest US$35 million ($48.3 million) in the development. The rest is to be funded by the City of Pensacola; Escambia County; Triumph Gulf Coast, Inc.; the State of Florida; as well as several other state and federal organisations.  

The upcoming design-to-build MRO complex is situated adjacent to ST Engineering’s newly opened 173,500 sf MRO facility, and will consist of three state-of-the-art widebody aircraft hangars and an administration building.

When completed, it will contribute about 1.5 million labour hours in annual capacity, bringing ST Engineering’s total annual capacity of its Pensacola MRO facility – to be called the Pensacola Aerospace Campus – to 2.1 million labour hours.  

Vincent Chong, president and CEO of ST Engineering, believes the group’s commitment to invest in technology and capability, as well as developed a highly-skilled and robust workforce in the new MRO facility, will further strengthen the position of ST Engineering’s aerospace network across the US and globally.

“We are excited to embark on this expansion, with unique financial opportunity via city, county and state support, in conjunction with the Triumph Gulf Coast fund availability,” says Lim Serh Ghee, president, Aerospace, ST Engineering.

“The attractiveness of this investment is further strengthened by the strong eco-system and robust aerospace industry, supported by a ready workforce pool in the Florida panhandle region that we can tap on. We look forward to working as closely as ever with the [Pensacola] Mayor’s office and relevant local authorities and organisations to realise this expansion plan.”

In a Monday report, UOB Kay Hian analyst K Ajith says views the news as a positive development given the relatively low capex requirement for the expanded facilities. 

"83% of the capex will be funded by the Florida government, while the remainder will be funded by ST Engineering. When completed in four years, this will raise ST Aerospace's MRO man hours by 1.5m to 2.1m for the Florida facility. As at 2016, ST Engineering's aerospace division had a capacity of 9m labour hours," he elaborates. 

UOB is maintaining its "buy" rating" on the stock with a target price of $4.06. 

As at 10:59am, shares in ST Engineering are trading 3 cents higher at $3.44.