Sea Launch CEO Sergey Gugkaev to leave company when S7 purchase closes

by

WASHINGTON — After steering Sea Launch into the hands of a new owner, chief executive Sergey Gugkaev will leave the company to look for a new role elsewhere in the space industry.

Gugkaev has been CEO of Sea Launch since 2012, and oversaw the company’s attempt to reestablish itself after emerging from bankruptcy only two years earlier.

Switzerland-based Sea Launch struggled to regain traction in the commercial market despite launching five times in 14 months between late 2011 and December 2012.

A 2013 failure that destroyed a $400 million Intelsat satellite, and the lack of any government customer ensuring consistent demand for Zenit rockets, forced Sea Launch out of the market the following year. The company  launched only once more, orbiting the Eutelsat-3B telecommunications satellite in May 2014. It hasn’t launched since.

In an interview with SpaceNews, Gugkaev didn’t give a specific reason for his near-term departure, saying only that the timing is right because of Sea Launch’s ownership changes. Russian aviation giant S7 Group announced at the International Astronautical Congress (IAC) in September 2016 its intent to buy Sea Launch and its assets, including its Odyssey sea-faring launch base and  Sea Launch Commander ship used to transport Zenit rockets and launch personnel.

Zenit Sea Launch Odyssey
Sea Launch used a sea-faring launch base called Odyssey to launch satellites atop Zenit rockets. Credit: Sea Launch

“It’s a good moment with these ownership changes,” he said. “I’ve spent an incredible nearly six years in my position. It has been tough, it has been extremely interesting, it has been an extraordinary time in a unique project with extraordinary people, but I believe right now it’s a good time to move for new challenges after the deal is done.”

S7 Group’s purchase was expected to be complicated given Sea Launch’s ownership makeup — 95 percent by Russia’s RSC Energia, 3.5 percent by Boeing in the United States and 1.5 percent by Aker of Norway — but still took longer than first expected. At IAC, S7 Group CEO Vladislav Filev said S7 Group and Sea Launch estimated it would take six months to obtain the necessary regulatory approvals from the involved nations. Instead it took 15 months.

Gugkaev said it wasn’t until December 2017 that the U.S. State Department approved the transfer of Sea Launch assets and intellectual property to S7 Group. He said Sea Launch also had an unexpectedly long wait with the Committee on Foreign Investment in the United States (CFIUS) an interagency committee that assesses whether transactions that could give control of an American business to a foreign entity might harm national security.

“We’ve been lucky,” he said. “Given also the ongoing Russian-U.S. tensions, we’ve been also prepared for bad news, but finally we got good news, which is great.”

Recent CFIUS difficulties are not unique to Sea Launch. MDA Corp. of Canada refilled paperwork to CFIUS last summer mid-merger with Colorado-based DigitalGlobe to give the group extra time to evaluate the corporate tie-up. Afterwards Howard Lance, CEO of the combined company Maxar Technologies, said CFIUS’s processes were unclear, but that staffing shortages appeared to cause a backlog of work for the interagency group. The State Department, whose staffing shortages have been widely reported, is a member of CFIUS.

This month CFIUS asked U.S. chipmaker Qualcomm, an investor in satellite startup OneWeb, to delay its annual stockholder meeting and board of director elections by at least 30 days so the organization could “fully investigate” a proposal by Singapore-based Broadcom to acquire Qualcomm. The White House on March 12 blocked the acquisition, citing CFIUS’s recommendation.

Gugkaev said Sea Launch’s asset sale to S7 Group faced additional scrutiny because its launch system uses equipment from Boeing that is controlled by U.S. International Traffic in Arms Regulations, or ITAR, including some U.S.-supplied avionics systems.

“We have also been in compliance with export compliance rules, and during the filing have been examined on these aspects, among others,” Gugkaev said.

Barring additional surprises, Gugkaev said he expects the sale will close in the next month or two, now that the most significant regulatory hurdles are in the past.

“We are now working on transition with S7. They are bringing their team and we are working with them on many aspects, giving them a lot of details on how the Sea Launch business operates,” he said.  

Sea Launch numbers between 40 and 50 people today, compared to over 100 when the company was fully operational, Gugkaev said. He said S7 Group has not yet picked his successor.

Gugkaev said it will be S7 Group’s decision whether to stick with the Russian-Ukrainian Zenit rocket as Sea Launch’s designated launch vehicle, or use a different vehicle, such as the Soyuz-5, an all-Russian rocket now under development.

Russia’s annexation of Crimea from Ukraine in 2014 strained relations between the two companies, and muddied the future of the Zenit rocket. The land-launched version of Zenit has flown twice since the Ukraine crisis: once in 2015 with the Russian weather satellite Electro-L, and once last year with Angola’s Russian-built telecom satellite Angosat-1. Both launched from Russia’s Baikonur Cosmodrome, and neither was organized by Sea Launch.