SYDNEY • Australia and France yesterday formally sealed an agreement under which French naval contractor DCNS will build a new fleet of submarines, a deal worth A$50 billion (S$52.3 billion).

Australia picked DCNS in April as its preferred bidder to build what will be the the world's largest diesel-electric submarines, ahead of offers from Japan and Germany. The signing finalises one of the world's most lucrative defence contracts.

"This is a critically important step in the development of our security, in the assurance of our government in delivering Australians the security and prosperity that they need," said Prime Minister Malcolm Turnbull.

The new fleet of 12 submarines is the centrepiece of Australia's defence strategy unveiled in February, which called for an increase in military spending of nearly A$30 billion over the next 10 years to protect strategic and trade interests in the Asia-Pacific region.

Australia rejected offers from Japan's Mitsubishi Heavy Industries and Kawasaki Heavy Industries, and Germany's ThyssenKrupp when selecting DCNS.

The French government-linked company will build a diesel-electric version of its Barracuda-class nuclear submarine which it is providing to the French navy.

The submarines will carry an American combat system. Work at the Adelaide shipyard handling the task will begin in 2022, with the first sub due in the water after 2030.

Earlier this year, DCNS was left reeling after details from documents relating to submarines it is building for India were published in The Australian newspaper, leading to concerns about the company's ability to protect sensitive data.

But Australian government ministers said they were certain about the security of their new submarine fleet.

REUTERS