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Defense News Roundup: V-22 Ospreys Take Wing, and 30 Apaches Head to Iraq

By Rich Smith - Feb 2, 2014 at 2:15PM

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Here's our weekly rundown of the major stories in defense spending.

The U.S. military has a reputation as a somewhat secretive organization. But in one respect at least, the Pentagon is one of the most "open" of our government agencies. Every day of the week, rain or shine, the Department of Defense tells U.S. taxpayers what contracts it's issued, to whom, and for how much -- all right out in the open on its website.

So what has the Pentagon been up to this week?

DoD is budgeted to spend about $6.2 billion a week on military hardware, infrastructure projects, and supplies in fiscal 2014. (A further $5.6 billion a week goes to pay the salaries and benefits of U.S. servicemen and servicewomen). So far this year, though, spending has been exceedingly light, with roughly $10.4 billion in contracts awarded through the entire month of January. The trend continued into last week, with contracts adding up to "only" $2.52 billion.

And what did the generals get for their (read: "our") money?

Renewable energy for a "green" army
Remember how last summer, the Pentagon spent several weeks in a row announcing contract after contract awarded to fund renewable energy purchases? Seven billion dollars' worth of renewable energy purchases? Well, it turns out they still aren't done picking winners.

On Wednesday, the Pentagon named privately held California renewables firm Foresight Renewable Solutions, LLC, to participate in the $7 billion project, adding it to the list of companies that can bid on task orders for the Pentagon's green energy "Power Purchase Agreements." Authorized by a 2012 Renewable and Alternative Energy Power Production, Multiple Award Task Order Contract (MATOC), the PPAs aim to buy $7 billion worth of "reliable, locally generated" wind, solar, biomass, and geothermal energy for the military over the course of the next 30 years, with the goal of getting 25% of the Pentagon's power requirements (1 gigawatt) covered by "renewable" sources by 2025. 

Hardened aircraft
Elsewhere in the high-tech arena, the Pentagon awarded General Dynamics (GD 0.44%) $24 million to continue doing R&D work under the U.S. Air Force's Hardened Materials Research and Survivability Studies Program. General Dynamics will be researching ways to "harden" aircraft, up-armoring them not only to resist shrapnel from anti-aircraft, but to protect planes and helicopters from "photonic light and electromagnetic energy" as well.

And speaking of planes and helicopters
One vehicle that is a little bit of both -- part plane, part helo -- is the V-22 Osprey that is jointly built by Textron (TXT 2.03%) and Boeing (BA 0.56%). The Osprey won $100 million in additional funding Thursday. The Pentagon awarded $10 million to the companies' Bell-Boeing Joint Project Office to pay for logistics work on USMC-variant MV-22 Ospreys and Air Force and Special Operations Command CV-22 Ospreys. A further $90 million went to Rolls-Royce to pay for 40 of the AE1107C engines that power the Ospreys.

Opportunities on the horizon
So much for the contracts that everyone knows about. Now, let's move on to one contract that may not yet be incorporated into defense contractors' stock prices.

On Monday, we learned that the U.S. Defense Security Cooperation Agency has notified Congress of plans to make a massive arms sale to the Government of Iraq. The Pentagon will rush dozens of AH-64E Apache attack helicopters to the front, to combat incursions into the country by al-Qaeda fighters from Syria. In the first wave, six Apaches will go to Iraq under a $1.4 billion lease deal. The Iraqi military will begin training to operate and maintain these helicopters, in preparation for a second wave of 24 Apaches that will be sold to the Iraqi military outright for an additional $4.8 billion.

Boeing will build the birds, General Electric (GE 2.07%) will build the T700-GE-701D engines to power them, and Lockheed Martin (LMT 0.21%) will supply upwards of 630 Hellfire missiles to arm them.


What good is an Apache without Hellfires to shoot with? Photo: Wikimedia Commons.

This contract hasn't been officially announced yet, and isn't common knowledge. Thus, few investors are factoring it into their valuations. Very few people know about it -- except that now, you do.

Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of General Dynamics, General Electric, Lockheed Martin, and Textron. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

General Electric Company Stock Quote
General Electric Company
GE
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The Boeing Company Stock Quote
The Boeing Company
BA
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Lockheed Martin Corporation Stock Quote
Lockheed Martin Corporation
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Textron Inc. Stock Quote
Textron Inc.
TXT
$68.37 (2.03%) $1.36
General Dynamics Corporation Stock Quote
General Dynamics Corporation
GD
$231.48 (0.44%) $1.02

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