A rain of millions like the sector in Spain had never seen before. This is what the arms industry is experiencing this year as events have accelerated, with Donald Trump pressing for his NATO partners to increase defense spending as soon as possible and Vladimir Putin continuing with his invasion of Ukraine and threatening the European Union’s eastern flank. Although Spain has not succumbed to US pressure to increase military spending to the equivalent of 5% of gross domestic product, this year alone it significantly increased this item with an additional 10,471 million, bringing defense spending to 2% when 2024 ended at only 1.4%.
This item includes 31 Special Modernization Programs (PEM) aimed at improving the equipment of the three armies that make up the Armed Forces, in sectors as diverse as cybersecurity, listening systems, ships, armored vehicles, support vehicles, training, communications, software, land artillery and even one dedicated to FCAS, the future European combat air system that Spain leads together with Germany and France. For now, the Executive has given orders to Defense to start negotiating a handful of these PEMs with the winning companies, for which the Ministry of Industry has already approved the pre-financing for 30 of them, for a total of 14,223.85 million euros at 0% interest spread over several years.
This money must not pass through a Congress of Deputies in which the PSOE is a minority and in which many of its partners such as Sumar (in the government) or ERC (as parliamentary support) are not in favor of increasing military spending. Other projects such as Perte (Strategic Projects for Economic Recovery and Transformation), endowed with billions to help industries such as the automotive industry, also did not pass through parliament.
The Government’s intention is that the money that will be allocated to PEMs reaches the entire value chain, but the truth is that there are three clear protagonists: Indra, Airbus and Navantia, which are present in 98% of these loans, either directly, within a UTE (Temporary Business Union) or because they control a good part or all of the companies awarded. The latter is the case of Hisdesat, of which Indra owns 7% while Hispasat holds 43%. But, in turn, Hispasat is controlled by Indra: the company chaired by Ángel Escribano has called an extraordinary general meeting of shareholders for November 28 to approve the purchase of 89.68% of Hispasat. Specifically, Hisdesat was awarded the PEM for the development of the new PAZ II earth observation satellites which will replace PAZ I, which will say goodbye between 2030 and 2031.
For the new satellites, Industry will lend 1,011.85 million to Hisdesat for a contract whose approximate amount is not yet known, since Defense has not yet received the order from the executive to start negotiations with the company, which will arrive in the next few weeks. Hisdesat in turn commissioned Airbus to produce the satellites. This European giant has won other large contracts, such as the PEM aimed at modernizing the flight systems used by the Air Force to train its pilots, who are currently training with modernized F-5 units. These American planes will be replaced by 45 Turkish planes based on the Hürjet platform developed by Turkish Aerospace. This company will produce them and then Airbus will make a Spanish adaptation. The Government has given permission to Defense to negotiate this contract with Airbus which will be for approximately 3,120 million and has received pre-financing from Industry for 1,040 million.
The only EMP for which the industry has not yet approved pre-financing is that of the Santiago Phase II program. This program, called “Replacement of previous systems in the electromagnetic spectrum” in the Industrial and Technological Plan for Security and Defense of 2025, is very relevant for the Armed Forces, because it is a program related to cyber warfare, listening systems and espionage. The Council of Ministers is expected to approve the pre-financing in the coming weeks, explain sources close to the matter. It is a long-standing and very sensitive national security program. According to the Industrial and Technological Plan for Security and Defense, this PEM will serve to modernize antennas and sensors, as well as obtain eight 8×8 ground platforms (i.e. eight wheels with traction on all) and four sensors for unmanned vehicles.
While waiting to know more details about this PEM and its prize, there are only two programs in which Indra, Airbus or Navantia do not participate in some way. One of these is intended for the manufacture of the exploration and reconnaissance vehicle, which fell into the hands of the Galician company Urovesa, for which the State will lend it 132 million. The second concerns the upgrade of the Pizarro, a type of armored vehicle based on the Ascod platform of GDELS (the European ground vehicle subsidiary of the American General Dynamics, owner of the Spanish Santa Bárbara) which weighs half that of the German Leopard tank. Logically, this PEM fell to GDELS with a contract that will be worth around 288.75 million, even if a part will go to Sapa, which will carry out the transmissions, which will retain almost 27 million.
However, GDELS lost to Indra and Escribano Mechanical & Engineering (EM&E) – which, if its purchase is approved, will also be from Indra – the juiciest PEM, the one intended to replace the army’s mobile artillery on chains and wheels. The Executive approved pre-financing for both contracts worth 3,002 million euros. The bridge launcher, another PEM that GDELS aspired to, was also for Indra.
The Spanish shipping giant Navantia is left with five PEMs for which a joint pre-financing of almost 2.3 billion has been approved. The largest is the one intended for the modernization of the F-100 frigates of the Álvaro de Bazán class, which will coexist in the coming decades with the F-110 frigates, the first of which, the BonifazNavantia has already been launched into the sea in September in the port of Ferrol. For the modernization of the F-100s the Executive has approved a loan of 1,280 million.
Another company that has managed to take advantage of these PEMs is Telefónica, which, through a joint venture with Indra, has been left with the so-called “multidisciplinary connectivity”, which consists in “the supply with production of the material necessary to equip command posts, to respond to the need of armies to modernize deployable command, control and communication systems, increasing their operational capabilities, through the application of new information and telecommunications technologies”, according to the reference of the Council of Ministers of 28 October. The contract will have a value of approximately 785 million, with pre-financing equal to almost half of the contractual value.
The Oesía group also scratched a PEM in joint venture with Epicom – a defense company specializing in cryptography that at the time belonged to Duro Felguera, but which is now divided between Indra and Oesía, with 30% each, and the State, which owns 40%. This program is the so-called “cryptographic and multipurpose capability”, with which the Executive aims to acquire tactical means of voice and data encryption, which will serve to replace current ones that have become or will become obsolete. The contract is worth 158.6 million.
For its part, Tess Defense, the joint venture composed of Indra, EM&E, Sapa and GDELS, of which Indra took control this year by formalizing the purchase of more than 50%, will be in charge of the production of the tracked support vehicle. The State is currently in conflict with Tess over continued delays and setbacks in the Dragon 8×8 VCR program. Indeed, last month the Minister of Defense, Margarita Robles, expressed her “concern” to Indra, to whom she informed that she “reserves appropriate action” for these failures.
