Lockheed Martin’s [LMT] Terminal High Altitude Area Defense (THAAD) sale to the United Arab Emirates (UAE) will make the system more affordable for the U.S. military as budgets tighten, company officials said.

Lockheed Martin THAAD Vice President and Program Manager Tom McGrath said the company looks forward to adding on foreign sales to future U.S. procurement, which “will increase our production rates and make the program more sustainable over the years to come.”

This makes interceptor cost more affordable for the U.S. government.

“The UAE buy will add to U.S. plans,” McGrath said recently in a conference call. “It does increase the (production) rate by 50 to 100 percent increase in the rate of build.”

McGrath said the company is finishing the first two of four THAAD batteries of 48 missiles, contracted in 2006. Contracts for the third battery came in 2010 and the fourth in 2011. Lockheed Martin is currently building five interceptors a month, ahead of plans.

“This is the first FMS sale,” Lockheed Martin Corporate Business Development Vice President Dennis Cavin said. “It is a milestone as we look at the development of the THAAD system.”

Lockheed Martin believes the THAAD FMS to the UAE is the start of more international sales since ballistic missile threats in the Middle East and the uncertainties surrounding North Korea and other states are leading interest in the program.

“The demand for a very capable missile defense system has never been stronger,” Cavin said. The U.S. government is in discussions with several governments about future sales.

Additionally, Cavin said, FMS sales lead to increased production quantities, reducing prices, which means the United States can procure more for the same budget.

Discussions with the UAE began 2007 and continually evolved as the company worked to determine the UAE’s mission requirements. It started with the procurement of the Patriot PAC-3 in 2007, and has now moved on to THAAD procurement. Lockheed Martin is also competing to upgrade the UAE’s Air Operation Center, another piece of the country’s integrated architecture.

“The UAE now has a very robust integrated integrated missile defense architecture, arguably the best in the world,” Cavin said. “THAAD is the only exo-endo capability in the world today, leveraging Lockheed Martin hit-to-kill technology.”

The contract includes two fire units, 96 interceptors, support and training, Cavin said.

The Defense Department announced the $1.96 billion sole source contract Dec. 31. The contract must still be finalized, which could slightly change the contract figures.

The Missile Defense Agency (MDA) is the FMS contracting authority.

The UAE is a very strong partner with the United States in the region, and the THAAD FMS will increase the Emirates’ national capability and regional capability, Cavin said.

McGrath said THAAD will conduct an intercept test this fall as part of a large integrated ballistic missile defense test. The MDA is now working out test details.