Navy Teams Up with Private Equity to Fund New Submarine Supplier Yard in Mobile, Alabama

In a significant public-private partnership, the U.S. Navy has selected a Connecticut-based private equity group to fund the construction of a major submarine supplier yard in Mobile, Alabama. This new facility, named Mobile Naval Yard, will play a crucial role in building modules for the Virginia- and Columbia-class submarine programs. The partnership is part of a broader effort to revitalize the U.S. maritime industrial base, which has been drastically reduced over the past 30 years.

According to Matt Sermon, executive director of the Navy’s program executive office for submarines, the facility could grow to employ up to 3,000 workers. These efforts are essential for the Navy’s recapitalization plans as the U.S. ramps up submarine production amid rising global security concerns.

“The Navy and its submarine industrial base partners are swiftly recapitalizing a maritime industrial base that has dwindled to about a third of its former capacity over the last three decades,” Sermon said in a statement Friday. “Once again, Mobile and the Gulf Coast region will answer the call to support critical national security needs.”

A Private Equity-Backed Investment for National Security

On Friday, the United Submarine Alliance Qualified Opportunity Fund, backed by CapZone Impact Investments LLC, purchased 355 acres on Pinto Island along the Mobile River. The new facility will occupy part of this land, which already houses Alabama Shipyard, a maintenance yard that services Military Sealift Command and commercial vessels. While Alabama Shipyard will remain as a tenant, the rest of the parcel will be transformed into a new hub for submarine module production.

The project is partially funded by a $152 million Navy contract awarded to Austal USA, a key limited partner in the United Submarine Alliance Fund. The funding was part of the Fiscal Year 2024 National Sea-Based Deterrent funds, aimed at boosting the submarine industrial base’s capacity. This initiative reflects the Navy’s commitment to ensuring a reliable supply chain for critical defense programs.

Economic Development in Opportunity Zones

The deal has drawn attention not only for its national security implications but also for its economic impact. CapZone Impact Investments LLC, founded in 2018, focuses on investing in federal opportunity zones, which are designated as economically distressed areas to encourage development. These zones offer significant tax incentives for investors who channel capital gains into projects that benefit underdeveloped regions.

The opportunity zone program, created in 2017, allows investors to reduce their tax burden by investing in distressed areas, a key incentive that attracted CapZone and its partners to this project. This investment could spur economic growth in Mobile and the surrounding Gulf Coast region, creating thousands of new jobs and bolstering the local economy.

As the Navy continues to modernize its submarine fleet, the Mobile Naval Yard will become a critical piece of the puzzle, supporting the construction of advanced submarines for decades to come. The public-private partnership underscores the importance of revitalizing America’s industrial base to meet evolving defense needs.

In the meantime, Mobile, a city with a rich shipbuilding history, is poised to play a leading role in the nation’s defense strategy, while also benefiting from the economic development associated with the opportunity zone investment.

Financial Desk