BERLIN (Reuters) -German defence giant Rheinmetall is in the final stages of negotiating a multi-billion-euro ammunitions supply contract, CEO Armin Papperger told Reuters in an interview on Tuesday.

Speaking on the sidelines of a groundbreaking ceremony for a new ammunitions factory in Lithuania, Papperger said the deal "could be worth a two-digit-billion euro figure" and that Rheinmetall was also in talks with the German government about the delivery of a satellite system.

Germany plans to boost defence spending to 3.5% of gross domestic product by 2029, a hefty increase from a 2% NATO quota that it only achieved for the first time in three decades in 2024.

To make it possible, an exemption for defence spending from debt rules was approved in March after much political wrangling.

Papperger said the domestic order situation was good, and that he expected a strong uptick in 2026.

"We are currently discussing the possibility of opening a drone factory here in the Baltic states," he told Reuters, adding that this could come in the form of a joint venture with Baltic companies.

Rheinmetall's joint venture with Italy's Leonardo - launched last year to develop and manufacture military combat vehicles - is gaining momentum, Papperger said.

The first contract involving armored personnel carriers worth several hundred million euros has been signed, Papperger said, adding that orders worth around 5 billion euros were expected in the next 12 months.