Turkey awarded the contract four years ago, ordering 10 drones known as Herons from their manufacturers, Israel Aerospace Industries and Elbit.

The contract deadline was initially set at between 24 and 30 months. But both contractors missed the first date, also breaching another deadline for the delivery of four Herons last August.

Under the revised deal, delivery of another two drones would have followed, plus the last four by the end of last October.

With those deadlines breached once more and Turkey threatening to call off the order, both sides have agreed to keep the deal on track but that Elbit and Israel Aerospace Industries each pay as much as $15 million in fines for delaying delivery of the drones.

The prominent Turkish daily Hurriyet quoted Muharrem Dortkash, director general of the Turkish Aerospace Industry, as saying that he anticipated the formal announcement of the revised deal by the end of the week.

The deal is estimated at $185 million.

"What was problematic about the delivery of the Herons was, according to Israeli engineers, the difficulty in the strengthening of Heron engines to enable local Aselsan-made electro-optical payloads (Aselfir300T) to be fitted onto the Heron UAVs," Hurriyet reported. "The Aselsan payload weighed more, which necessitated the strengthening of the Heron UAV engines," it added.

Last month senior Turkish military officials threatened to pull the plug on the contract, giving the Israeli firms 50 days -- or else, until early January -- to iron out problems hampering the drones' delivery.

At a recent news conference, Dorkash told reporters that "the involved parties" of the contract, including the Turkish defense procurement office, the Israeli firms and TAI had reached a "certain point of reconciliation."

He did not elaborate and Israeli media reported the apparent breakthrough but without any reference to penalties set against the two Israeli firms involved in the project.

While the bulk of the project rest with IAI and Elbit, TAI is the Heron program's prime contractor.

"We expect to deliver the systems in the first and second quarters of next year," Dorkash said.

An unnamed Turkish military source cited by the Hurriyet daily said the Israeli fines would be paid "in the form of services and equipment, than money."

The deal is said to have been discussed during a meeting between President Shimon Peres and Turkish President Abdullah Gul while in Copenhagen.

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