Millions of people flocked to this sector of Spain, an unprecedented number. That’s what the military industry is experiencing this year, with events accelerating this year, with President Donald Trump demanding early release of defense spending from NATO allies and President Vladimir Putin continuing to invade Ukraine and threatening the eastern flank of the European Union. Undeterred by the US arrest, Spain has increased its military spending to the equivalent of 5% of its gross domestic product (GDP), but this year it has significantly increased this amount by adding $10.471 billion alone, raising defense spending to 2% when 2024 ends at just 1.4%.
The match included 31 Special Modernization Programs (PEMs) designed to improve the equipment of the three armed forces of the Armed Forces in areas as diverse as cybersecurity, shielding systems, ships, armored and support vehicles, training, communications, software and land artillery, including one dedicated to FCAS, the future European Combat Air System, which Spain will lead together with Germany and France. At present, the Executive Directorate has ordered Defensa to undertake negotiations between the award-winning companies and a small number of PEM funds, for which the Ministry of Industry has approved a 30-year pre-finance with a total of 14,223.85 million euros to be distributed over several years at 0% interest.
This funding is not due to the fact that the PSOE is in the minority and will pass through the House of Commons, where some of its partners like Smar (in the government) and the ERC (as parliamentary support) are not in favor of increasing military spending. Other initiatives were also passed by Congress, such as Perte (Proyectos Estratégicos para la Recuperación y Transformación Económica), which would give hundreds of billions of dollars to support industries such as automobiles.
While the government’s intention is for the funds allocated to PEM to span the entire value chain, the clear protagonists are Indra, Airbus and Navansia, who are present in 98% of these loans, either directly within UTE (European Union) or because these companies control many of the award-winning companies overall. The latter is the case with Hidesat, which holds 43% while Indra holds 7%. This time, however, Hispasat is in control of Indra – the company, chaired by Angel Escribano, called an extraordinary general meeting on November 28 and approved the acquisition of 89.68% of Hispasat’s shares. Specifically, Hisdesat was awarded the PEM for the development of a new PAZ II-level observation satellite to replace PAZ I. This is planned between 2030 and 2031.
For the new satellite, Industria will provide $1,011.85 million to Hidesat, but the contract value is not yet known, while Defensa has not yet received an executive order to begin negotiations with the company, which is expected in the coming weeks. Hisdesat outsourced the manufacture of the satellite to Airbus. The European giant has also won other major contracts, including PEM, which aims to modernize the flight systems used by the Air Force to train pilots, who are currently training on modernized F-5 units. These American aircraft will be replaced by 45 Turkish aircraft based on the Hürjet platform developed by Turkish Aerospace. Manufactured by this company, Airbus will adapt it to Spanish. The government has given Defensa permission to negotiate with Airbus on the contract, which will cost about $3.12 billion, with pre-industrial financing worth $1.04 billion.
The only PEM for industry that has not yet approved pre-financing is Santiago’s Phase II program. This program, called “Replacement of Previous Systems in the Electromagnetic Spectrum” in the Industrial Technology Plan for Security and Defense 2025, is highly relevant for the military, as it is a program related to cyber warfare, eavesdropping systems and espionage. The Council of Ministers will consider pre-financing in the coming weeks and explain its sources of knowledge on the issue. This is a program that comes from far away and is very sensitive to national security. According to the Industrial Technology Plan for Security and Defense, this PEM aims to modernize antennas and pickups, in addition to acquiring eight 8×8 ground platforms (all with eight towing wheels) and four sensors for unmanned vehicles.
We are waiting to know more about this PEM and its awards, but these are the only two programs in which Indra, Airbus and Navantia are not participating in any way. One of them, which will be used for the production of exploration and reconocimiento vehicles, will go to Gallega Urovesa, for which the state will provide $132 million. The second relates to the update of the Pizarro, a type of armored vehicle based on the Ascod platform of GDELS (the European Land Vehicle division of the American General Dynamics, based in Santa Barbara, Spain), which is lighter than the German Leopard tank. Naturally, this PEM leaves GDELS with about 288.75 million contracts, but if that contract is lost, the transmitting Sapa will cease, leaving about 27 million.
However, GDELS lost to Indra & Escribano Mechanical & Engineering (EM&E). If the purchase is approved, it will also be made by Indra. The most powerful PEM was destined to replace the mobile artillery of the Tierra army with chains and wheels. The Executive Board has approved pre-financing for both contracts totaling 3,002 million euros. Another PEM aimed at GDELS, the launcher, was also for Indra.
Spanish marine giant Navancia is left with five PEMs and has been approved for co-pre-financing of around 2.3 billion. The mayor is the man destined to modernize the F-100 frigates of the Álvaro de Bazan class, and will live with the first of the four F-110 frigates for decades to come. BonifazNavantia arrived at sea in September at the port of Ferrol. To modernize the F-100, the government approved a loan of 1.28 billion.
Another company that has successfully taken advantage of these PEMs is Telefonica, which has entered into a so-called “multi-discipline connectivity” through UTE with Indra. According to a reference from the Council of Governments, this will “meet the military’s needs to supply the production of materials needed to equip control stations, modernize deployable command, control and communication systems and improve operational capabilities.” Ministers on October 28th. The value of this contract is approximately 785 million yen, and each portion of the contract value will be pre-financed.
Oesia Group also collaborated with Epicom to create a PEM within UTE. Epicom is a defense company specializing in encryption that was owned by Duro Felguera at the time, but now Indra and Oesia each have about 30% and the state owns about 40%. The plan is called “Encryption and Multi-Purpose Capability,” and with it, officials aim to acquire tactical voice encryption methods and data to replace current methods that are outdated. The contract value is 158.6 million.
For her part, Tess Defense, a UTE founded by Indra, EM&E, Sapa and GDELS (Indra formalized its acquisition of more than 50% this year), will be responsible for manufacturing chained support vehicles. The state is currently at odds with Tess over continued delays and delays in the VCR 8×8 DRAGON program. Defense Minister Margarita Robles arrived last month with “concerns” for Indra and told him “appropriate action will be taken” in response to these failures.
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