Profile | Sergey Gugkaev, Chief Executive, Sea Launch AG
“Let me say that my first reaction is relief,” Sea Launch AG Chief Executive Sergey Gugkaev told aaudience after the company’s successful May 26 launch of the Eutelsat 3B telecommunications satellite.
Nearly 16 months after a launch failure that destroyed a highly insuredsatellite, Sea Launch, based in Switzerland but owned by a Russian company, returned to flight and wants the commercial market to view it as back in business.
Between a 2007 failure that helped push the company into Chapter 11 bankruptcy proceedings in the United States, the appearance of a new company — Space International Services (SIS) — claiming rights to the same Zenit rocket Sea Launch uses, and then the 2013 failure, it has not been an easy road for Sea Launch.
It might also be assumed that a company relying heavily on Ukrainian and Russian hardware and expertise would be encountering additional difficulties. But Gugkaev said that beneath an agitated surface, relations between Sea Launch’s manufacturers, and between those companies and Sea Launch, have not suffered.
Gugkaev knows enough about launch anomalies not to gloat over the most recent failure of Russia’s Proton heavy-lift rocket. But he acknowledged that in the wake of that mishap, the sixth Proton anomaly since late 2010, commercial satellite operators are seeking alternatives and Sea Launch may be in a position to pick up a customer as early as late this year.
Educated as a lawyer and with a professional background that includes investment banking in Switzerland, Gugkaev has lived in Geneva for 10 years and is fluent in French and English in addition to Russian. He recently spoke with SpaceNews staff writer Peter B. de Selding.
What is the status of Zenit-3SL rocket hardware now?
Since our bankruptcy action we have invested most of our equity, and our resources, into the supply chain. We are ordering our hardware in lots. In our pipeline now we have a first lot of five rockets, including the one that just launched Eutelsat 3B. So there are four left, in different stages in production.
One will leave the factory sometime this summer and two others in 2015 to support launches for that year.
These suppliers are under firm contract to you?
Yes, it is a commitment. Not all of the funds have been released. We make payments as certain production milestones are reached. But yes, it is a firm order. For example, the next Block DM stage for us is already at our home port in Long Beach [California].
If a customer comes to you with a 5,000-kilogram satellite and says he wants to launch as soon as possible, what is your response?
We tell them we can launch late this year or in the first quarter of 2015, depending on the spacecraft. For example, if we have launched this kind of spacecraft before, it could take less time for integration.
I was thinking of a Boeing satellite, just to pick a platform.
Yes, we would have some homework.
But it could be done by the first quarter of 2015 in any event?
Yes. Of course it’s difficult to predict the geopolitical situation, but aside from that the production is going well for the time being and the small delay we had in the Eutelsat launch following a technical issue meant we had to have an urgent shipment of one piece of hardware from Ukraine. This was done very fast. So we see that on this point, things are going well.
The most recent Proton failure comes at a time of a strong manifest for both commercial and government launches on Proton. Is this an opportunity for you?
We definitely see there are a lot of concerns and a lot of nervous customers because of this. Does that mean these customers will change their contracts? That is another question, and it is something we are talking to them about.
Have the political tensions between Russia, the Ukraine and the West caused any hiccups for you in hardware production or delivery, or license approval?
For the time being, there have been no problems in terms of customs or production. We have an open export license from Russia to Ukraine. There are no issues in terms of shipping from Ukraine to the United States. The production licenses we have to the end of the year should have no problems.
Assuming you find a customer for the late 2014-early 2015 launch slot, how many other rockets could be made available for later next year?
The hardware should be ready to support another launch in 2015 — so two launches by the end of 2015. That’s the plan.
You have announced a dual launch of AngolaSat and a satellite for your majority shareholder, RSC Energia, called Energia 100. When is that?
That is in 2016.
You have a launch reservation with EchoStar as well. Has that become firm?
They are building their business case right now.
Is there anybody else who has sought a launch from you in 2015?
We have another customer, but I can’t say too much about it. They have indicated they would probably want a launch in 2015.
Is that prospective customer’s satellite construction status consistent with a 2015 launch?
It is under construction right now. It could be ready for fourth quarter of 2015 or early 2016.
So for now you have only one firm slot available in 2015, with a second possible but still pending a decision by the unidentified customer. When will this customer say something definitive?
Very soon, I believe.
The Russian government has indicated it may wish to make use of Sea Launch, with a possible change of home port and ocean launch-site location. This could give you access to a broader market. What is the status of these discussions?
As a first step, and to make Russian government authorities more comfortable with us, we are targeting the launch of Russian commercial satellites, from RSCC [Russian Satellite Communications Co.] and Gazprom. This would get us a foot in the door. We have never been considered a launch option by these companies.
But things are changing inside both companies, and in the federal space program. RSCC is going their own way with the Ministry of Communications, so they now have more opportunities to organize open tenders and to choose their suppliers.
They could choose alternatives to Proton?
Let me say that they are seeking to reduce their reliance on a monopoly, both in launch service providers and in satellite builders.
Would you need to move Sea Launch’s home port from Long Beach to accommodate RSCC launches?
No, there is no need to do that. Both Russian commercial satellite fleet operators are already ordering Western satellites — from Airbus Defence and Space, and from— so they would not have a problem with our operating from Long Beach.
You have been in litigation with SIS over commercial launches of Zenit vehicles from Russia’s Baikonur Cosmodrome under the Land Launch brand name. What is the status of this?
We are now in the middle of a dispute with Space International Services, and we’re certainly looking forward to terminating the litigation, which brings no value to them or to us. Our position is that we have all exclusive commercial rights to the Zenit launch vehicle, except for Russian or Ukrainian military or government launches.
We think this opportunity — Land Launch operating the Zenit from Baikonur — will have a lot of appeal in the market. The Land Launch version has appeal for a lot of satellites, and adding a Land Launch alternative would enable us to boost the production at the Ukrainian factory and benefit from economies of scale.
So you would like Sea Launch to take over commercial Zenit launches from Baikonur?
Correct. We would like to be able to offer customers an opportunity to launch lighter satellites.
Who makes the final determination of this?
Swedish law governs this arbitration. The place of the arbitration is to be decided soon.
Does the dispute with SIS/Land Launch relate specifically to one or two rockets, or is it centered on future commercial launch management?
It started during our bankruptcy and is related to the nonrefund of advance payments for rockets by SIS that Sea Launch paid to ensure AsiaSat andmissions.
European launch services provideris feeling competitive pressure from Space Exploration Technologies Corp., particularly for the smaller geostationary satellites that launch in the lower position on the Ariane 5 rocket on most of its missions, and adjusting its prices accordingly. Do you need to react to as well?
All launch providers will have to change their mentality to adapt to this disruption in the market. Our changes in this case would include more quality oversight.
How much flexibility do you have in your pricing? Can you move as the market shifts and still remain viable financially?
Yes, especially when we offer dual launch capabilities, where we stack one satellite on top of another. This will give us more flexibility.
Are there ways to cut production or operating costs?
Yes, and we have begun looking at that with Energia and our key suppliers. There are procedures that were put into place many years ago and that survive today only because it’s they way things have always been done since the Soviet era.
It will be a difficult process for all concerned, but we need to adapt to the market.
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