Galileo: the Concession Merry-Go- Round
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360 DEGREES ate-General for Energy and Transport, serious challenges: the size of the mar- The transition from ESA to the con- Galileo: the says, “The Commission will not sign ket and prospective revenue sources for cession is complicated by the fact that up to a deal where risk is shifted to the the concessionaire, liability risks, and the design of the system took place under Concession EC. Have no illusions — the EC will not the terms and timing of the hand-over one contract (ESA/Galileo Industries) accept a deal that shifts all the risk to the of project management from ESA to the while another contract (consortium/ Merry-Go- public sector. We want the private sector concessionaire. GJU/GSA) will implement it. to do what they say the do well: act as an The current business model identi- One observer close to the process Round entrepreneur rather than simply ensur- fies €8.5 billion in prospective conces- says the GJU hoped to have common ing an acceptable return on an invest- sion revenues over the 20-year term of position worked out with the conces- isk allocation, avoidance, and ment. We want a real [public/private the contract, against €7 billion in costs. sionaire on the three key risk issues to management are the watch- partnership]; without that, there will be However, large unknowns revolve take to European Transport Council for words of the day as the contract no deal.” around the portion of the Galileo approval at its March 27 meeting. That Rnegotiation for the Galileo con- Carlo des Dorides, Head of GJU Con- market that will be unregulated and would allow the two sides to resolve the cession moves into its endgame. cession Division, says the discussions accessible to the concession’s revenue lesser risk factors and finish the conces- Talks have gone on for more than a have identified nine categories of risk in measures. sion contract proposal, which has to year between the Galileo Joint Under- the project: cost overruns, completion, As for liability against potential be reviewed and approved by council taking (GJU) and a superconsortium revenues (market), performances, design lawsuits for damages that Galileo users before being signed and monitored by of leading European industrial entities, (interface between IOV and Concession may bring, the concession has proposed the GSA. financial institutions, and communi- program), overall risk coverage (spare, a tiered risk-pool arrangement with In the Same Boat? The strength of the cations service providers — including contingency, insurance), deployment what it believes to be the vast majority two sides’ relative political positions former competitors and a late-arriving program, compensation on termination, of exposure covered by insurance pur- are deeply intertwined as a result of the German consortium integrated into the and replenishment. chased by the concessionaire. It is asking years of public and private process that private sector team only last December. GJU and consortium members agree, the public sector to deal with financial have led up to the current situation. On (“Love at second sight,” is how Martin however, that only three of these pose risks above that level. Continued on page 67 Ripple, director of EADS Space’s Gali- ESA/RAL leo program and chief negotiator in the The 25-meter antenna at the Chilbolton Observatory of the Rutherford Appleton Laboratory contract talks, describes the merger of near Didcot, United Kingdom, used to track GIOVE-A transmissions. the iNavSat, Eurely, and TeleOp teams (See “Perils and Pearls of Galileo,” Janu- process of being set up under the direc- ate successfully in 17 frequency modes ary/February 2006, Inside GNSS). tion of Pedro Pedreira. Although not to achieve the complete Galileo filing The consortium and GJU are well directly involved in the contract nego- with the International Telecommunica- past a December 2005 goal for conclud- tiations, the GSA is regularly briefed on tions Union. ing a 20-year agreement that will guide the progress of talks. In March, ESA officials told the BBC deployment and operation of the Euro- Work on the Galileo deployment News in London that successful results pean GNSS, but most participants now continues apace, however, following from GIOVE-A mean that the second predict that a deal will not be signed a €950-million contract signed by the experimental spacecraft, GIOVE-B, much earlier than the end European Space Agency probably won’t need to be launched of this year. Earlier delays (ESA) and Galileo Indus- until this autumn. Also, late in March in reaching agreements tries in January. The contract members of a bilateral EC/U.S. techni- among European Union will continue rollout of the cal working group reached agreement (EU) governments, ESA, ground and space infrastruc- on design of the new optimized civil the European Commis- ture, including four in-orbit signals in which the signal structure of sion acting as the EU’s validation (IOV) satellites to the Galileo L1 OS will be the same as executive arm, and private be launched in 2008. the GPS L1C. sector companies finally Meanwhile, the first Galil- Back in Brussels. Many aspects of the led the project sponsors eo IOV experimental satellite, concession contract have already been to acknowledge that a fully operational launched last December, began trans- worked out, leaving the complex and Galileo system would not be completed mitting signals on January 12. Accord- crucial issue of sizing, allocating, and until 2010, two years later than origi- ing to ESA officials and Surrey Satellite providing against the financial risks nally planned. Technology Ltd., which built and is associated with Galileo. The GJU will cease operations short- operating the satellite, the GIOVE-A is The stakes are high, and some asso- ly after the signing of a concession con- performing well and expected to achieve ciated tension is manifesting itself pub- tract, turning responsibility for monitor- its primary mission: securing the radio licly. ing contract fulfillment over to a Galileo spectrum allocations sought by the Gali- Heinz Hilbrecht, director for trans- Supervisory Authority (GSA) still in the leo program. The spacecraft must oper- European networks in the EC Director- 18 InsideGNSS A P RIL 2006 www.insidegnss.com www.insidegnss.com A P RIL 2006 InsideGNSS 19 360 DEGREES Continued from page 19 established in a 2001 plan to rebuild and the one hand, the GJU would seem to modernize the Russian GNSS. ICG Working be at a disadvantage, having only one Meanwhile, according to an RIA candidate concessionaire after the com- Novosti news report, Federal State Uni- Group Takes On petitors merged (reportedly with some tary Enterprise NPO Prikladnoi Mekha- quiet encouragement by the public sec- niiki “M. F. Reshetnev” in Krasnoyarsk Issues tor). Moreover, Galileo has gained such responsible for designing the modern- n ad hoc working group has a high profile — effectively serving as ized GLONASS satellites has received begun sorting through issues the flagship project for a unified Euro- orders to build four more GLONASS- surrounding the recent forma- pean space initiative — that considerable M satellites — with the possibility of Ation of the International Com- political “face” would be lost with a col- increased number of launches in 2007. mittee on GNSS (ICG). lapse of the project now. Four GLONASS-M spacecraft are A December meeting ended with the On the other hand, the would-be currently in orbit, although the two status of the group somewhat unresolved private partners have invested years of launched December 25, 2005, have still as a result of issues raised by Russian and effort and budget to reach this point, not begun transmitting. Altogether, 17 Chinese representatives (Inside GNSS, and they are recipients of EC and ESA operational January/February 2005, “What in the contracts for programs besides Galileo. GL ONA S S World Is the UN Doing about GNSS?”). As one observer noted, “The consortium s a t e l l i t e s The working group was set up to address will not abandon the project because were in orbit those issues. they have to come back to the EC for as of March The ICG formed under the auspices other programs and project funding.” 27, but only of the United Nations Office for Outer Ripple acknowledges the complex- 13 were cur- Space Affairs (UN OOSA) following six ity of the deal-making that sometimes rently broad- years of workshops and outreach efforts has as many as 18–20 participants in casting navigation messages. to broaden understanding of GNSS the room — although only two directly Meanwhile, the Russian Federation technology and applications. The com- negotiating and the remainder serving and the European Union (EU) have mittee seeks to encourage compatibility as information resources and de facto signed a wide-ranging agreement to and interoperability among the various counselors on specific topics. Asked if he cooperate in space activities. Meeting GNSSes, while increasing their use to “saw a danger that this concession con- in Brussels on March 10. Anatoliy Per- support sustainable development. tract negotiation could fail, Ripple says, minov, the director of the Federal Space Its first meeting took place March 2, “I don’t think so. We have advanced the Agency of the Russian Federation (Ros- coinciding with the 43rd session of the discussion well beyond the point of no cosmos), and European Commission Scientific and Technical Subcommit- return. We have a commitment to sign Vice-President Günter Verheugen signed tee of the Committee on the Peaceful an agreement by the end of the year, and a joint document aimed at enhancing the Uses of Outer Space (COPUOS). Work- I don’t think it can fail.” bilateral relationship. An implement- ing group participants selected Ken “We can do it [reach agreement on a ing agreement was also signed by Jean- Hodgkins, deputy director of the U.S.