As Galileo Finances Tighten Europe Spreads the Burden

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China likely will build the search-and-rescue payloads on board Europe’s Galileo satellite navigation constellation as part of an attempt to ease budget pressures on Galileo’s main underwriters, the European Space Agency (ESA) and the European Commission, European government and industry officials said.

The decision is the latest example of how the 30-satellite Galileo system will take on a more international character as technologies not deemed strategic or militarily sensitive are farmed out to lower-cost companies in nations outside Europe that also are investing in Galileo, officials said.

In another example of the system’s internationalization, Israel is being considered as a supplier of high-precision atomic clocks — but only those that will be used as part of the system’s ground segment. The clocks on the Galileo satellites will be supplied only by European companies, including Galileo Avionica of Italy and Temex Neuchatel Time of Switzerland.

The Chinese work is intended to reduce by about 40 million euros ($50 million) the outstanding Galileo development bill at ESA and the European Commission. Both agencies are having trouble winning the needed financial support from their member governments to pay for an estimated 450 million euros in Galileo design and development cost overruns.

The overruns were caused by a delay of more than a year in starting Galileo contract work, and by the addition of security-related elements to the system to assure that it was protected against intentional and unintentional jamming.

ESA and the European Commission, which are dividing the 1.1 billion euro cost of Galileo’s initial design and the deployment of four test satellites, have agreed to share equally the cost overrun as well.

European companies currently are at work on what is called Galileo’s In-Orbit Validation contract. A preliminary authorization to proceed with this work, which includes Galileo’s ground network as well as the initial group of satellites, was contracted with industry in December. The money was supposed to last six months.

But as time neared for ESA and the European Commission to fund the rest of the validation phase, several European governments began setting conditions for their support.

Germany said it would not approve the additional payments until it is certain what role German enterprises will have in the final Galileo system, including a Galileo control center and the headquarters of the privately owned consortium to manage Galileo as a business.

Sigmar Wittig, chairman of the executive board of the German Aerospace Center, DLR, said he would not agree to pay for the cost overruns and the rest of the In-Orbit Validation contract until these longer-term questions were answered to Germany’s satisfaction.

Wittig said June 16 that Germany also is negotiating to have DLR as a shareholder in the future Galileo operating company as part of a German consortium that could include Deutsche Telekom subsidiary T-System and the German operation of EADS Space.

Other governments are resisting the German move, saying a private-sector company should not have government shareholders, and above all should not have a government shareholder from only one nation.

The Italian government is also balking at paying its share of the Galileo cost overrun. Sergio Vetrella, president of the Italian Space Agency, said June 17 that Italy has not been given a detailed explanation of the 450 million euros in cost overruns.

Vetrella said that if Galileo’s security-related specifications are responsible for the overruns, then these should be paid exclusively by the European Commission, not by ESA, because it was the commission that insisted on them.

ESA’s ruling council is scheduled to meet June 21-22 and had been expected to discuss the Galileo funding problem. Jean-Jacques Dordain, director-general of the European Space Agency, said June 17 that, given the German and Italian opposition, he may withdraw the issue from the agenda. But the September funding-shortage date, he said, cannot be wished away.

“Something has to happen by September,” Dordain said June 17. “Do we want to stop the program until we sort out all the issues? I don’t think so. I don’t need the money immediately from our member states, I just need to open our normal three-month subscription period so that we are ready to provide the funds in September.”

Dordain dismissed the idea that the reasons for the cost overruns were unclear. “We have distributed a ton of documentation on this to our delegations,” Dordain said. “The reasons are clear to everyone.”

The European Commission has rounded up about 130 million euros of the approximately 225 million that is its share of the cost overrun, according to Olivier Onidi, head of the Galileo unit at the commission’s energy and transport directorate.

The funding issue is complicating the task of selecting a Galileo concession manager. European governments have agreed to permit the two competing concessions to merge their bids into a single offer to be submitted on June 20.

If the combined bid is acceptable, the merged team starting July 1 will enter negotiations on a Galileo program-management contract that could be signed by early 2006, Onidi said.