ESA Spending Freeze Ends with Deals for Sentinel Satellites, Ariane 5 Upgrade

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PARIS — The European Space Agency (ESA) has reopened its payment spigot after a three-week moratorium, signing well over 500 million euros ($720 million) in new contracts during the week ending Dec. 18. The major contracts include three Sentinel Earth observation satellites, preliminary development of work on a new upper stage for the Ariane 5 rocket and a winged space-plane demonstrator, according to ESA and European industry officials.

The flurry of year-end activity followed an assessment by ESA’s finance directorate that the agency’s cash deficit, which had been estimated at up to 400 million euros by late 2010, is likely to be much less severe.

ESA officials have concluded that they do not need to take out a loan to cover the shortfall and that if the agency faces liquidity issues this year, they can be handled as they arise by less drastic means.

As a result, ESA officials have reopened their checkbooks to settle a pile of already-negotiated contracts that has been growing since the mid-November moratorium on any new commitments valued at more than 10 million euros.

Among the most significant contracts signed are for duplicate models of the three Sentinel Earth observation satellites being built by ESA and the 27-nation European Union as part of the Global Monitoring for Environment and Security (GMES) program. The contracts were signed with the same companies building the so-called Sentinel A-units.

The Sentinel 1B satellite, carrying C-band radar, will be built by ThalesAlenia Space Italy for 128.8 million euros, compared with 229 million euros for the identical Sentinel 1A spacecraft contracted in June 2007.

Sentinel 2B, carrying a superspectral imager, will be built by Astrium Satellites under a contract valued at 98.6 million euros, compared with 195 million euros for the Sentinel 2A spacecraft, contracted in April 2008.

Sentinel 3B, carrying an ocean-altimetry mission, will be built by ThalesAlenia Space France under a 143.1million euro contract. The Sentinel 3A contract, signed in April 2008, was valued at 305 million euros.

ESA Earth Observation Director Volker Liebig said in a Dec. 18 interview that the three contracts could have been delayed until 2010 without affecting the program schedule, but that the prime contractors’ price proposals included a Dec. 31 deadline. Meeting that deadline, Liebig said, will ensure that the contractors take maximum advantage of being able to build two sets of instruments rather than one.

ESA’s launcher division was also active, signing contracts for a proposed Ariane 5 rocket upgrade that features a new, restartable motor called Vinci.

Antonio Fabrizi, ESA’s launcher director, said Dec. 18 that the agency signed a 157 million euro contract with Astrium Space Transportation of Les Mureaux, France, for what is called the Ariane 5 Midlife Evolution program. The contract covers two years of work by Astrium, motor-builder Snecma and the other Ariane 5 contractors to conduct reviews of the proposed new upper stage.

ESA government ministers will be asked in late 2011 or early 2012 to approve full-scale development of the Vinci-powered stage, which is designed to increase Ariane 5’s payload carrying power to 12,000 kilograms into geostationary-transfer orbit, the destination of most telecommunications satellites.

Fabrizi also signed a contract with ThalesAlenia Space Italy for the Intermediate Experimental Vehicle (IXV), a 5-meter-long, 1,800-kilogram winged vehicle scheduled to test atmospheric re-entry technologies following a launch aboard Europe’s Vega rocket in 2012 or 2013. The contract is valued at 39.4 million euros to cover preliminary IXV work for 18 months, Fabrizi said.

ESA Director-General Jean-Jacques Dordain said that when the 400 million euro gap was discovered in November, he asked the agency’s division heads to deliver a second, more precise estimate of their spending needs in 2010. As expected, the second estimates showed a substantially lower demand for cash than the first, which were based on optimistic assessments of how program milestones, and thus contract payments, would proceed.

Ludwig Kronthaler, the agency’s director of finance, said that in addition to the fresh forecast of lower cash demands, ESA received a cash payment of 150 million euros from its member states, a payment that had not been expected.

“It appears that some member states have underspent in their national programs and therefore they had reserves available and sent them to us,” he said. “The effect of these two events means that what we thought might be a cash deficit of 400 million euros or more by late 2010 will in fact be no higher than 200 million euros.”

Kronthaler said Dec. 22 that a possible liquidity problem of 200 million euros in late 2010 is manageable given the agency’s total 2010 budget of nearly 3.6 billion euros, including revenue ESA earns from third-party contracts. “We will not need to reduce our budget for 2010,” Kronthaler said. “It will be pretty much identical to 2009.”

ESA has recently put into place a broad financial reform package that takes effect in January 2010 and should make it easier for agency managers to track spending requirements more closely.