Reuters International

By Andrea Shalal

BERLIN (Reuters) - European defence manufacturer MBDA will submit its proposal for a $4.5 billion German missile defence system by late September, two months later than planned, but still hopes Germany can approve the project early next year, it said on Wednesday.

Germany chose the Medium Extended Air Defense System (MEADS), made by MBDA and Lockheed Martin Corp, last year over Raytheon Co's Patriot system, but said the firms would have to meet tough performance milestones to retain the contract, one of Germany's biggest arms projects.

If the project is not approved by the German parliament in early 2017, it could well slip into 2018 or later due to German elections next year, which would delay fielding the next-generation missile defence system until 2023 or later, a German government source said this week.

MBDA, jointly owned by Airbus Group, Britain's BAE Systems Plc and Italy's Leonardo Finmeccanica SpA, said the companies involved in the project needed more time to negotiate and finalise details of their proposal.

"We expect to submit the proposal by the end of September, and would assume that the German parliament can review the plans early next year," said MBDA spokesman Roland Kuntze.

German officials are determined to avoid the costly delays and technical challenges that have plagued another big European programme, the Airbus A400M military transport plane.

Kuntze said MBDA was separately assessing whether it could find a European source for an exciter, a component on the MEADS fire control radar, instead of the one developed independently by Lockheed and tested on the MEADS system. The study should be completed in coming weeks, he said.

Airbus and Leonardo also build such equipment, but would have to carry out costly and potentially time-consuming work to develop and test the required component, according to two sources familiar with the programme.

Germany, however, has already expressed interest in buying the Lockheed part, the sources said.

U.S. officials have signed off on the possible sale of Lockheed's component, a deal that would be worth tens of millions of dollars to the U.S. company, according to one of the sources.

(Additional reporting by Sabine Siebold; Editing by Susan Fenton)

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