Russia bails out debt-ridden Khrunichev
PARIS — Russia’s Roscosmos, acting in its new role as a state corporation tasked with reforming Russia’s space industry, on April 19 said debt-ridden space-hardware builder Khrunichev Space Center had been provided with subsidies and loans to stabilize its accounts.
Roscosmos said the cash infusion in particular would allow Moscow-based Khrunichev to repay its suppliers back debt of more than 20 billion Russian rubles, or about $300 million at current exchange rates. Roscosmos said Khrunichev’s total debt stood at 114 billion rubles as of late 2014.
In 2015, Roscosmos and Khrunichev were given new chief executives, both with non-space, commercial backgrounds. Roscosmos is now a state corporation as well as Russia’s space agency.
Roscosmos Director-General Igor Komarov is a former president of Russia’s Lada automobile manufacturer. Khrunichev Director-General Andrey V. Kalinovsky is a former president of the civil aircraft division of Russia’s Sukhoi.
U.S. and European government and industry officials who have negotiated with both men say they have brought a Western-style business approach to their companies.
“It’s like night and day,” said one European government official, referring specifically to Komarov compared to his predecessors.
State-owned Khrunichev is one of Russia’s largest and best-known space companies and is notably the builder of Russia’s Proton heavy-lift rocket.
Khrunichev in April is celebrating the 20th anniversary of the first Proton launch of a non-Russian commercial telecommunications satellite – Luxembourg-based SES’s Astra 1F, which was launched April 9, 1996.
Since then, the Russian government has allowed Khrunichev to consolidate its ownership of Proton subcontractors. In 2008, Khrunichev became the principal owner of International Launch Services of Reston, Virginia, which manages commercial Proton contracts.
The U.S. government agreed to permit Proton’s entry into the global commercial launch market in the 1990s on condition that the Russian vehicle’s pricing would not undercut the prevailing U.S. and European providers.
The U.S. government in effect ordered Proton’s builders and operators to charge more than they might have in the years following Proton’s 1996 commercial debut.
Those rules have been allowed to wither in part because, until recently, U.S. heavy-lift rockets have not been active in the low-margin commercial launch market.
The arrival of SpaceX of Hawthorne, California, into the commercial mix in the past few years has not revived the price issue, especially since it is SpaceX’s Falcon 9 rocket, and not Proton, that has been the market’s low-cost provider.
But before SpaceX, Khrunichev and ILS had hewed, more or less, to the same commercial pricing structure as that practiced by Europe’s Arianespace commercial launch service provider.
Notwithstanding this U.S. government-approved cartel-type situation, Khrunichev’s ability to generate substantial hard-currency revenue from commercial Proton launches was apparently insufficient to assure the company’s financial stability.
In its April 19 statement, Roscosmos said Khrunichev is on schedule to meet the government-ordered 10-year recovery schedule.
The first phase, between 2015 and 2016, is to stabilize its financial accounts and reduce its debt. To achieve this goal, Roscosmos said the company had “received subsidies from the government and a loan from Vnesheconombank,” which is the Russian Development Bank. “This financial support has enabled smooth production operations and the repayment of debt to suppliers.”
The second phase, between 2017 and 2020, includes the implementation by Khrunichev of a broad strategic reorganization that is designed to yield sustained profitability between 2021 and 2025.
Roscosmos said the reforms under way at Khrunichev have already yielded a 12 percent increase in labor productivity in 2015 and an 18.8 percent increase in average Khrunichev employee salaries, “which is above the level of inflation of the country.”
The wage increases have reduced the turnover among younger employees, Roscosmos said.
Among other changes to Russia’s space industry landscape expected in the coming years is a consolidation of launch vehicles around Khrunichev’s Angara modular rocket. Angara variants stretch from a vehicle to launch mid-size Earth observation satellites into polar orbit, to the Angara 5 heavy-lift variant for large telecommunications satellites to geostationary orbit.