Galileo Prime Contractor Expects No Trouble Finding a Profit as European Navigation Satellites Encounter New Delays

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PARIS — The prime contractor of Europe’s 22 Galileo positioning, navigation and timing satellites said it is likely to retain its planned profit on the program despite delays that have caused European Commission officials to threaten penalties.

Satellite builder OHB AG of Bremen, Germany, said it had completed development of the first satellites earlier than planned, and that this will compensate for the late start in testing and later-than-planned delivery to its customer, the European Space Agency (ESA). The net result, the company said, will be no material change to the program’s profitability.

In a conference call with investors, OHB Chief Executive Marco R. Fuchs said the first of the OHB-built Galileo satellites did not begin a six-week campaign of thermal-vacuum testing until late October, four months later than planned.

Fuchs said one reason for the late start is that the test chamber, located at the ESA’s European Space Research and Technology Centre in Noordwijk, Netherlands, was not ready when the first Galileo satellite arrived.

“The preparation of the test chamber took longer to complete as it was not capable of meeting the temperature ranges” required, Fuchs said during the conference call Nov. 11. “It had to be modified. This is a new chamber and it had to be completed and qualified.”

Government and industry officials have said the most realistic schedule at this point is that the 22 OHB-built Galileo satellites, using a payload provided by Surrey Satellite Technology Ltd. of Britain — which was late in being delivered — will not be ready to launch before June, and perhaps not before September. That would put the program about nine months behind schedule, if not more.

Officials said engineers from Thales Alenia Space of France and Italy have been tasked to assist OHB in the Galileo effort.

European Commission Vice President Antonio Tajani, whose office oversees Galileo, said the delays will not cost European taxpayers because any extra costs will be financed through penalties imposed on the contractors. The commission owns Galileo and has hired ESA as the program’s technical manager, with OHB the prime contractor for the 22 spacecraft on order.

Four earlier Galileo satellites, built by a consortium of Thales Alenia Space and Astrium Satellites, are already in orbit.

In the conference call, Fuchs sidestepped the issue of possible financial penalties and sought to portray the program as on track. Spending extra time to assure thorough testing of the first two satellites is no bad thing, he said, as it will facilitate the deliver of the 20 satellites to follow.

OHB’s contract calls for delivery to ESA of the satellites after all testing has been completed and certified as successful. While the thermal-vacuum facility is at an ESA establishment, it is OHB that is in charge of the test campaign.

OHB is maintaining its forecast that full-year 2013 revenue will surpass 700 million euros ($945 million), up 11 percent from 2012, and that its pretax profit margin will be 5.1 percent compared with 4.9 percent in 2012.

Fuchs said a shortfall in the three months ending Sept. 30 in the performance of MT Aerospace of Augsburg, Germany, which is 70 percent owned by OHB and specializes in Ariane 5 rocket fuel tanks, will not affect MT’s full-year performance.

The shortfall followed MT’s inability to deliver two Ariane 5 tanks by Sept. 30 because of a defective weld. Fuchs said the welding machine was refurbished and the tanks will be delivered before the end of the year.

In addition to the Galileo issues, OHB’s third-quarter performance was highlighted by its 816 million euro contract with the German Defense Ministry for a second-generation radar reconnaissance constellation, called SARah. OHB will build two of the three SARah satellites, and has contracted with Astrium Satellites to provide the third satellite, to carry a phased-array antenna, under a contract valued at 344 million euros including the satellite’s launch.

Astrium is providing the launch of its SARah satellite through its previous purchase of a Falcon 9 rocket operated by Space Exploration Technologies Corp. (SpaceX) of Hawthorne, Calif. Astrium is expected to seek a co-passenger for this launch.

OHB has signed a separate contract with SpaceX to launch the two OHB-built SARah satellites together on a Falcon 9.

 

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