France Approves Budget That Gives CNES Stablility

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The French government on April 26 signed a six-year budget commitment with the French space agency, CNES, that guarantees funding stability — but with almost no increase — and will permit CNES to consider modest investments in new programs.

CNES also will be looking to sell its stake in the Arianespace launch consortium this year, according to Yannick d’Escatha, the agency’s president.

The French budget, research and defense ministers, in signing the 2005-2010 commitment, stressed that the government was giving the space agency unprecedented visibility to make program planning easier.

The agreement calls for French space investment in the European Space Agency (ESA) to remain frozen at 685 million euros ($895 million) per year through 2010. CNES is ESA’s single largest contributor and accounts for between 25 and 30 percent of the European agency’s annual spending.

CNES’s biggest budget commitment to ESA relates to launch vehicle development; in 2005 it accounts for 50 percent of French ESA spending. Programs include ongoing work on the Ariane 5 heavy-lift launcher, the French-led effort to adapt Russia’s Soyuz rocket for launches from Europe’s French Guiana spaceport, spaceport maintenance, and France’s minority-share participation in the Italian-led Vega small-satellite launcher , now in development.

The budget for France’s national space missions — those that are not managed by ESA — will be 681.4 million euros in 2005 and will rise by 1.5 percent per year over the six-year period.

D’Escatha said 25 percent of the national budget for 2005 will be dedicated to launcher-related programs, with 22 percent each going to environment-related efforts and sustainable development; defense and security efforts; and space science. The remaining 9 percent will be spent on programs including broadband telecommunications access, France’s work on the Galileo satellite navigation system, telemedicine and distance learning.

The launcher portion of the French national program is forecast to increase from 2006 through 2010 as France undertakes a launcher-research effort with Russia, d’Escatha said. Space science spending also is likely to increase with French participation in U.S.- and ESA-led missions.

How much flexibility CNES managers will have in their budget is unclear. The agency’s financial health has improved, and CNES expects to make a final payment of 10 million euros to retire a 35 million-euro debt that had built up over several years and has been repaid in tranches since 2003.

The agency also expects that while in some years — such as 2005 — it will owe more money to ESA than it can pay, in other years the opposite will be true and that these shortfalls and surpluses will cancel each other out.

CNES routinely takes on contracts — with the French Defense Ministry, ESA, the European Commission and others — whose annual volume can rise and fall and cannot be predicted down to the last euro.

In addition, CNES in 2005 is offering to sell its 32.5 percent ownership stake in Arianespace to one or more of Arianespace’s current industrial shareholders. EADS Space Transportation, the Ariane 5 rocket prime contractor, has indicated it would like a majority share of Arianespace. But d’Escatha has made clear that CNESPRIVATE puncspace:p  is not looking to exit Arianespace on fire-sale terms .

“We are waiting for an offer from industry,” d’Escatha said. “If the offer includes sufficient strategic guarantees — about the launcher’s availability, that it will not be sold off and so on — we could go to zero. There is no reason [a full- or partial-equity sale] could not occur in 2005.”

D’Escatha said an issue that has slowed negotiations on a sale price is how Arianespace of Evry, France, will cover its exchange-rate risks. Arianespace’s bills are paid in euros. But like most of the world’s aerospace firms, its revenues are generated mainly in U.S. dollars.

With the enhanced Ariane 5 ECA vehicle having returned to flight successfully in February, and with a share-capital increase approved by shareholders in late 2004, a French government sell-off is appropriate if an agreement can be reached on price, he said.