Nimrod planes have been patrolling London

BAE Systems has been battling with the government over delays and cost overruns to contracts for its Nimrod maritime patrol plane and Astute attack submarine.

BAE said the contract changes would lead to a �750m ($1.2bn; 1.1bn euros) charge, to be included in its latest profits statement, due on Thursday.

"We have agreed a new structure for the two contracts which reduces risk, while placing new incentives on the company to perform," Defence Procurement Minister Lord Bach said.

Lord Bach said that the renegotiation included a rise in the overall expected cost and delays to the in-service dates of the two projects.

Cheered investors

BAE shares surged 11.75p, or 10.1%, to 128p on the back of the news, as the City showed relief the charge was not higher.

"We have drawn a line under these programmes," BAE said in a statement.

"Both can now be completed by the company with the financial uncertainty removed."

There has been press speculation that the troubles at BAE would lead to the ousting of some senior executives.

Analysts are also concerned that the company has lost its credibility with the ministry, which has proved increasingly willing to funnel large orders to non-British companies.

The two contracts were originally worth �5bn.

Value for money?

In the case of the Nimrod, the government has agreed to delay the start of series production until the performance of the first three aircraft has been demonstrated.

And it has increased its project funding by about �270m.

For the Astute submarine, the MoD said the time and effort needed to turn computer designs into reality was greater than both sides had anticipated.

The government agreed to increase its funding of the project by about �430m while the company increased its investment by �250m.

"We are confident that the new deal represents a good deal for the taxpayer and will provide an outstanding new generation attack submarine for the Royal Navy," the MoD said.