Australia's largest warships have been declared free of "significant issues" more than two years after engine propulsion problems saw them docked for urgent repairs.

Key points: In 2017 the ABC revealed HMAS Canberra and HMAS Adelaide were out of action

In 2017 the ABC revealed HMAS Canberra and HMAS Adelaide were out of action Costing around $1.5 billion each, they were built by a Spanish company in collaboration with a British defence contractor

Costing around $1.5 billion each, they were built by a Spanish company in collaboration with a British defence contractor The Defence Department has confirmed problems on both vessels now appear to be resolved

Defence also confirmed it had reached a "favourable settlement" with the manufacturers of the Landing Helicopter Docks (LHDs) to recover costs, but would not reveal the final figure.

In 2017, the ABC revealed HMAS Canberra and HMAS Adelaide were out of action while maintenance crews at Sydney's Garden Island Naval Base worked to identify and resolve issues with the LHDs' azimuth propulsion system.

Costing around $1.5 billion each, the Canberra Class Amphibious Assault Ships had been recently built by Spanish company Navantia in collaboration with British defence contractor BAE Systems-Maritime, using azimuth pods from German manufacturer Siemens.

At one point, the mechanical problems on HMAS Adelaide were so bad that the 27,000-tonne ship had to be "dry-docked" as engineers worked to fix her propulsion system.

Two years later, the Defence Department has confirmed most mechanical problems on both vessels now appear to be resolved.

"Defence has worked very closely with the original equipment manufacturer (OEM) and industry to identify all issues that were affecting the performance of the Canberra Class Landing Helicopter Dock propulsion pod system," a spokesperson told the ABC.

"Measures have been implemented that have enabled the Canberra Class to operate without further significant issues."

HMAS Adelaide had to be repaired at the Royal Australian Navy base in Sydney. ( ABC News: Billy Cooper )

The spokesperson added that these solutions had "supported the ships undertaking various international engagements including the APEC forum, RIMPAC Exercises and other international deployments with the pod system continuing to operate within expected performance levels".

"Future improvements to the system will deliver further improvements and ensure that the Canberra Class capability continues to deliver into the future."

A defence official familiar with the remedial work carried out on HMAS Adelaide said the vessel was recently released from the Osborne shipyard in Adelaide and had arrived in Sydney just before Easter.

"I heard jokes that she was too sick and could never make it — it might not be final, but she can function," the official told the ABC on the condition of anonymity.

"She is able to get from point A to B it seems — this is a big achievement, and it took almost three years."

For the first time, the Defence Department has also confirmed it has received compensation from the manufacturers of the troubled vessels but said the details were subject to confidentiality provisions.

"The Commonwealth has negotiated a favourable settlement with the OEM to recover costs," it said.

"The settlement provides a positive outcome for both Defence and the OEM ensuring an increased Australian LHD knowledge base."